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Modeling Economic Growth and Energy Consumption in Arab Countries: Cointegration and Causality Analysis

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  • Mohammed Issa Shahateet

    (Princess Sumaya University of Technology, P.O. Box 1438, Amman 11941, Jordan.)

Abstract

This paper examines the relationship between energy consumption and real economic growth in 17 Arab countries: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen. It uses an Auto Regressive Distributed Lag (ARDL) model to determine this econometric relationship using data during 1980-2011. After testing for unit root and cointegration, it identifies Granger causality between energy consumption and real economic growth. The analysis allowed for the verification of the four hypotheses that have been discussed widely in economic literature: Neutrality, Conservation, Growth, and Feedback hypotheses. Empirical findings support neutrality hypothesis in 16 out of 17 Arab countries. These findings, of no causality from economic growth to energy consumption and the other way round, imply that energy conservation will not have a significant impact on economic growth and economic growth will have insignificant effect on changes in energy consumption. They also suggest including other more important variables in the determination of economic growth, such as labor and capital.

Suggested Citation

  • Mohammed Issa Shahateet, 2014. "Modeling Economic Growth and Energy Consumption in Arab Countries: Cointegration and Causality Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 4(3), pages 349-359.
    • Handle: RePEc:eco:journ2:2014-03-4
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    9. Moataz Elshimy & Khadiga M. El-Aasar, 2020. "Carbon footprint, renewable energy, non-renewable energy, and livestock: testing the environmental Kuznets curve hypothesis for the Arab world," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(7), pages 6985-7012, October.
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    More about this item

    Keywords

    economic growth; energy consumption; ARDL model; Granger causality; Arab countries;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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