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Causal Relationship between Fossil Fuel Consumption and Economic Growth in Japan: A Multivariate Approach

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  • Hazuki ISHIDA

    (Fukushima University, Faculty of Symbiotic Systems Science, Fukushima, Japan)

Abstract

This paper explores whether Japanese economy can continue to grow without extensive dependence on fossil fuels. The paper conducts time series analysis using a multivariate model of fossil fuels, non-fossil energy, labor, stock and GDP to investigate the relationship between fossil fuel consumption and economic growth in Japan. The results of cointegration tests indicate long-run relationships among the variables. Using a vector error-correction model, the study reveals bidirectional causality between fossil fuels and GDP. The results also show that there is no causal relationship between non-fossil energy and GDP. The results of cointegration analysis, Granger causality tests, and variance decomposition analysis imply that non-fossil energy may not necessarily be able to play the role of fossil fuels. Japan cannot seem to realize both continuous economic growth and the departure from dependence on fossil fuels. Hence, growth-oriented macroeconomic policies should be re-examined.

Suggested Citation

  • Hazuki ISHIDA, 2013. "Causal Relationship between Fossil Fuel Consumption and Economic Growth in Japan: A Multivariate Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 3(2), pages 127-136.
    • Handle: RePEc:eco:journ2:2013-02-2
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    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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