Disaggregated relationship between economic growth and energy use in OECD countries: Time-series and cross-country evidence

We examine the GDP – energy use nexus in OECD countries over the period of 1960 – 2014. For the first time, energy use and GDP data are both disaggregated into their main components. Panel cointegration techniques addressing heterogeneity and cross-sectional dependence are employed to infer the directions and the signs of long-run cross causalities between GDP and energy components. Results are threefold: first, there is a feedback relationship between total energy use and GDP at the aggregated level, mainly through the public expenditure channel. Second, the feedback relationship is validated between real GDP and transportation energy, residence energy and consumption energy, respectively, mainly through the exports and imports channels. Third,the conservation relationship is found between industrial energy and real GDP for which main transmission mechanisms are consumption, exports and imports.