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Is There Really Granger Causality Between Energy Use and Output?

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  • Bruns, Stephan B.

    ()
    (Max Planck Institute of Economics)

  • Gross, Christian

    ()
    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Stern, David I.

    ()
    (Crawford School of Public Policy)

Abstract

We carry out a meta-analysis of the very large literature on testing for Granger causality between energy use and economic output to determine if there is a genuine effect in this literature or whether the large number of apparently significant results is due to publication or misspecification bias. Our model extends the standard meta-regression model for detecting genuine effects in the presence of publication biases using the statistical power trace by controlling for the tendency to over-fit vector autoregression models in small samples. Granger causality tests in these over-fitted models have inflated type I errors. We cannot find a genuine causal effect in the literature as a whole. However, there is a robust genuine effect from output to energy use when energy prices are controlled for.

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Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 11/2013.

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Length: 60 pages
Date of creation: Aug 2013
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Handle: RePEc:ris:fcnwpa:2013_011

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  1. Stern and Enflo, Energy Economics
    by David Stern in Stochastic Trend on 2013-05-05 08:17:00
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Cited by:
  1. Bruns, Stephan B. & Gross, Christian, 2013. "What if energy time series are not independent? Implications for energy-GDP causality analysis," Energy Economics, Elsevier, vol. 40(C), pages 753-759.
  2. Andrea Vaona, 2013. "Countervailing inequality effects of globalization and renewable energy generation in Argentina," Working Papers 12/2013, University of Verona, Department of Economics.
  3. Michelsen , Carl Christian & Madlener, Reinhard, 2013. "Switching from Fossil Fuel to Renewables in Residential Heating Systems: An Empirical Study of Homeowners’ Decisions in Germany," FCN Working Papers 14/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  4. Stephan B. Bruns, 2013. "Identifying Genuine Effects in Observational Research by Means of Meta-Regressions," Jena Economic Research Papers 2013-040, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  5. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Challenges in the Evaluation of Ultra-Long-Lived Projects: Risk Premia for Projects with Eternal Returns or Costs," FCN Working Papers 13/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  6. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Optimal Power Generation Investment: Impact of Technology Choices and Existing Portfolios for Deploying Low-Carbon Coal Technologies," FCN Working Papers 12/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  7. Hackbarth, André & Madlener, Reinhard, 2013. "Willingness-to-Pay for Alternative Fuel Vehicle Characteristics: A Stated Choice Study for Germany," FCN Working Papers 20/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  8. Emilian Dobrescu, 2013. "Updating the Romanian Economic Macromodel," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 5-31, December.

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