IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2019-04-6.html
   My bibliography  Save this article

The Causality Relationship between Economic Growth and Energy Consumption in The World s top Energy Consumers

Author

Listed:
  • Majed S. Almozaini

    (Faculty Member at Institute of Public Administration, Riyadh, Saudi Arabia and Ph.D. Candidate in Economics, Howard University, USA)

Abstract

The purpose of this paper is to empirically and economically investigate the causal relationship between economic growth and energy consumption in five countries with high consumption during the period of 1968-2016. These countries are China, India, Japan, the United States, and Saudi Arabia. Using the cointegration relationship between the variables procedure and the Granger causality test. This period witnessed various changes in the economy, consumption, and production of these countries. The causality results for the countries show that there is a unidirectional, and bidirectional Granger causality between the variables. Therefore, the energy conservation policy should be designed with caution, as energy is an engine for GDP growth.

Suggested Citation

  • Majed S. Almozaini, 2019. "The Causality Relationship between Economic Growth and Energy Consumption in The World s top Energy Consumers," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 40-53.
    • Handle: RePEc:eco:journ2:2019-04-6
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/7657/4398
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/7657/4398
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yuan, Jia-Hai & Kang, Jian-Gang & Zhao, Chang-Hong & Hu, Zhao-Guang, 2008. "Energy consumption and economic growth: Evidence from China at both aggregated and disaggregated levels," Energy Economics, Elsevier, vol. 30(6), pages 3077-3094, November.
    2. De Vita, G. & Endresen, K. & Hunt, L.C., 2006. "An empirical analysis of energy demand in Namibia," Energy Policy, Elsevier, vol. 34(18), pages 3447-3463, December.
    3. Mounir Belloumi & Atef Saad Alshehry, 2015. "Sustainable Energy Development in Saudi Arabia," Sustainability, MDPI, vol. 7(5), pages 1-18, April.
    4. Ozturk, Ilhan & Aslan, Alper & Kalyoncu, Huseyin, 2010. "Energy consumption and economic growth relationship: Evidence from panel data for low and middle income countries," Energy Policy, Elsevier, vol. 38(8), pages 4422-4428, August.
    5. Waheed A. Banafea, 2014. "Structural Breaks and Causality Relationship between Economic Growth and Energy Consumption in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 726-734.
    6. Lee, Chien-Chiang & Chang, Chun-Ping, 2005. "Structural breaks, energy consumption, and economic growth revisited: Evidence from Taiwan," Energy Economics, Elsevier, vol. 27(6), pages 857-872, November.
    7. Jamal BOUOIYOUR & Refk SELMI & Ilhan OZTURK, 2014. "The Nexus between Electricity Consumption and Economic Growth: New Insights from Meta-Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 621-635.
    8. Zhang, Xing-Ping & Cheng, Xiao-Mei, 2009. "Energy consumption, carbon emissions, and economic growth in China," Ecological Economics, Elsevier, vol. 68(10), pages 2706-2712, August.
    9. Ghosh, Sajal & Kanjilal, Kakali, 2014. "Long-term equilibrium relationship between urbanization, energy consumption and economic activity: Empirical evidence from India," Energy, Elsevier, vol. 66(C), pages 324-331.
    10. Bildirici, Melike E. & Kayıkçı, Fazıl, 2012. "Economic growth and electricity consumption in former Soviet Republics," Energy Economics, Elsevier, vol. 34(3), pages 747-753.
    11. Chen, Sheng-Tung & Kuo, Hsiao-I & Chen, Chi-Chung, 2007. "The relationship between GDP and electricity consumption in 10 Asian countries," Energy Policy, Elsevier, vol. 35(4), pages 2611-2621, April.
    12. 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.
    13. Cheng, Benjamin S. & Lai, Tin Wei, 1997. "An investigation of co-integration and causality between energy consumption and economic activity in Taiwan," Energy Economics, Elsevier, vol. 19(4), pages 435-444, October.
    14. Abbas, Faisal & Choudhury, Nirmalya, 2013. "Electricity consumption-economic growth Nexus: An aggregated and disaggregated causality analysis in India and Pakistan," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 538-553.
    15. Azam, Muhammad & Khan, Abdul Qayyum & Bakhtyar, B. & Emirullah, Chandra, 2015. "The causal relationship between energy consumption and economic growth in the ASEAN-5 countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 732-745.
    16. Bildirici, Melike, 2012. "Economic Growth and Electricity Consumption in Africa and Asia: MS-VAR and MS-GRANGER Causality Analysis," MPRA Paper 40515, University Library of Munich, Germany.
    17. Apergis, Nicholas & Payne, James E., 2010. "Renewable energy consumption and economic growth: Evidence from a panel of OECD countries," Energy Policy, Elsevier, vol. 38(1), pages 656-660, January.
    18. Yu, Eden S. H. & Hwang, Been-Kwei, 1984. "The relationship between energy and GNP : Further results," Energy Economics, Elsevier, vol. 6(3), pages 186-190, July.
    19. Ajmi, Ahdi Noomen & El Montasser, Ghassen & Nguyen, Duc Khuong, 2013. "Testing the relationships between energy consumption and income in G7 countries with nonlinear causality tests," Economic Modelling, Elsevier, vol. 35(C), pages 126-133.
    20. Asafu-Adjaye, John, 2000. "The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries," Energy Economics, Elsevier, vol. 22(6), pages 615-625, December.
    21. Sbia, Rashid & Shahbaz, Muhammad & Hamdi, Helmi, 2014. "A contribution of foreign direct investment, clean energy, trade openness, carbon emissions and economic growth to energy demand in UAE," Economic Modelling, Elsevier, vol. 36(C), pages 191-197.
    22. Crompton, Paul & Wu, Yanrui, 2005. "Energy consumption in China: past trends and future directions," Energy Economics, Elsevier, vol. 27(1), pages 195-208, January.
    23. Shahbaz, Muhammad & Zakaria, Muhammad & Shahzad, Syed Jawad Hussain & Mahalik, Mantu Kumar, 2018. "The energy consumption and economic growth nexus in top ten energy-consuming countries: Fresh evidence from using the quantile-on-quantile approach," Energy Economics, Elsevier, vol. 71(C), pages 282-301.
    24. Isamu Matsukawa, 2016. "Energy Conservation in Japan," SpringerBriefs in Economics, in: Consumer Energy Conservation Behavior After Fukushima, chapter 0, pages 7-17, Springer.
    25. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    26. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    27. Jorge Blazquez, Lester C Hunt, and Baltasar Manzano, 2017. "Oil Subsidies and Renewable Energy in Saudi Arabia: A General Equilibrium Approach," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    28. Vipin Arora & Shuping Shi, 2016. "Energy consumption and economic growth in the United States," Applied Economics, Taylor & Francis Journals, vol. 48(39), pages 3763-3773, August.
    29. Isamu Matsukawa, 2016. "Consumer Energy Conservation Behavior After Fukushima," SpringerBriefs in Economics, Springer, number 978-981-10-1097-2, October.
    30. Ghosh, Sajal, 2002. "Electricity consumption and economic growth in India," Energy Policy, Elsevier, vol. 30(2), pages 125-129, January.
    31. Sari, Ramazan & Ewing, Bradley T. & Soytas, Ugur, 2008. "The relationship between disaggregate energy consumption and industrial production in the United States: An ARDL approach," Energy Economics, Elsevier, vol. 30(5), pages 2302-2313, September.
    32. Lee, Chien-Chiang, 2006. "The causality relationship between energy consumption and GDP in G-11 countries revisited," Energy Policy, Elsevier, vol. 34(9), pages 1086-1093, June.
    33. Mutascu, Mihai, 2016. "A bootstrap panel Granger causality analysis of energy consumption and economic growth in the G7 countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 63(C), pages 166-171.
    34. Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
    35. Benjamin S. Cheng, 1999. "Causality Between Energy Consumption and Economic Growth in India: An Application of Cointegration and Error-Correction Modeling," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 34(1), pages 39-49, January.
    36. Masih, Abul M. M. & Masih, Rumi, 1996. "Energy consumption, real income and temporal causality: results from a multi-country study based on cointegration and error-correction modelling techniques," Energy Economics, Elsevier, vol. 18(3), pages 165-183, July.
    37. Benjamin S. Cheng, 1998. "Energy Consumption, Employment and Causality in Japan: A Multivariate Approach," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 33(1), pages 19-29, January.
    38. Anthony N. Rezitis & Shaikh Mostak Ahammad, 2015. "The Relationship between Energy Consumption and Economic Growth in South and Southeast Asian Countries: A Panel Vector Autoregression Approach and Causality Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 5(3), pages 704-715.
    39. Apergis, Nicholas & Payne, James E., 2010. "Coal consumption and economic growth: Evidence from a panel of OECD countries," Energy Policy, Elsevier, vol. 38(3), pages 1353-1359, March.
    40. Stern, David I., 1993. "Energy and economic growth in the USA : A multivariate approach," Energy Economics, Elsevier, vol. 15(2), pages 137-150, April.
    41. Fatai, K & Oxley, Les & Scrimgeour, F.G, 2004. "Modelling the causal relationship between energy consumption and GDP in New Zealand, Australia, India, Indonesia, The Philippines and Thailand," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 64(3), pages 431-445.
    42. Soytas, Ugur & Sari, Ramazan, 2006. "Energy consumption and income in G-7 countries," Journal of Policy Modeling, Elsevier, vol. 28(7), pages 739-750, October.
    43. Tang, Chor Foon & Shahbaz, Muhammad, 2013. "Sectoral analysis of the causal relationship between electricity consumption and real output in Pakistan," Energy Policy, Elsevier, vol. 60(C), pages 885-891.
    44. Tang, Chor Foon & Abosedra, Salah, 2014. "The impacts of tourism, energy consumption and political instability on economic growth in the MENA countries," Energy Policy, Elsevier, vol. 68(C), pages 458-464.
    45. Wang, S.S. & Zhou, D.Q. & Zhou, P. & Wang, Q.W., 2011. "CO2 emissions, energy consumption and economic growth in China: A panel data analysis," Energy Policy, Elsevier, vol. 39(9), pages 4870-4875, September.
    46. Kahrl, Fredrich & Roland-Holst, David, 2009. "Growth and structural change in China's energy economy," Energy, Elsevier, vol. 34(7), pages 894-903.
    47. Alkhathlan, Khalid & Javid, Muhammad, 2013. "Energy consumption, carbon emissions and economic growth in Saudi Arabia: An aggregate and disaggregate analysis," Energy Policy, Elsevier, vol. 62(C), pages 1525-1532.
    48. Wolde-Rufael, Yemane, 2004. "Disaggregated industrial energy consumption and GDP: the case of Shanghai, 1952-1999," Energy Economics, Elsevier, vol. 26(1), pages 69-75, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Karen Fernandes & Y. V. Reddy, 2020. "Energy Consumption and Economic Growth in Newly Industrialised Countries of Asia," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 384-391.
    2. Engy Raouf, 2022. "Public Debt Energy Consumption Nexus," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 146-151, September.
    3. Korkmaz, Özge, 2022. "What is the role of the rents in energy connection with economic growth for China and the United States?," Resources Policy, Elsevier, vol. 75(C).
    4. Cheng, Yuk-Shing & Li, Raymond & Woo, Chi-Keung, 2021. "Regional energy-growth nexus and energy conservation policy in China," Energy, Elsevier, vol. 217(C).
    5. Korkmaz, Özge, 2022. "Do oil, coal, and natural gas consumption and rents impact economic growth? An empirical analysis of the Russian Federation," Resources Policy, Elsevier, vol. 77(C).
    6. Appiah, Michael & Karim, Sitara & Naeem, Muhammad Abubakr & Lucey, Brian M., 2022. "Do institutional affiliation affect the renewable energy-growth nexus in the Sub-Saharan Africa: Evidence from a multi-quantitative approach," Renewable Energy, Elsevier, vol. 191(C), pages 785-795.
    7. Md. Hasanur Rahman & Shapan Chandra Majumder & Shantanu Debbarman, 2020. "Examine the Role of Agriculture to Mitigate the CO2 Emission in Bangladesh," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 10(1), pages 392-405, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tiba, Sofien & Omri, Anis, 2017. "Literature survey on the relationships between energy, environment and economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 1129-1146.
    2. Farzana Sharmin & Mohammed Robayet Khan & Mohammed Robayet Khan, 2016. "A Causal Relationship between Energy Consumption, Energy Prices and Economic Growth in Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 6(3), pages 477-494.
    3. Sofien, Tiba & Omri, Anis, 2016. "Literature survey on the relationships between energy variables, environment and economic growth," MPRA Paper 82555, University Library of Munich, Germany, revised 14 Sep 2016.
    4. Herrerias, M.J. & Joyeux, R. & Girardin, E., 2013. "Short- and long-run causality between energy consumption and economic growth: Evidence across regions in China," Applied Energy, Elsevier, vol. 112(C), pages 1483-1492.
    5. Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
    6. Omri, Anis, 2014. "An international literature survey on energy-economic growth nexus: Evidence from country-specific studies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 951-959.
    7. Cosimo Magazzino, 2015. "Energy consumption and GDP in Italy: cointegration and causality analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 17(1), pages 137-153, February.
    8. Shahbaz, Muhammad & Zakaria, Muhammad & Shahzad, Syed Jawad Hussain & Mahalik, Mantu Kumar, 2018. "The energy consumption and economic growth nexus in top ten energy-consuming countries: Fresh evidence from using the quantile-on-quantile approach," Energy Economics, Elsevier, vol. 71(C), pages 282-301.
    9. Hasanov, Fakhri & Bulut, Cihan & Suleymanov, Elchin, 2017. "Review of energy-growth nexus: A panel analysis for ten Eurasian oil exporting countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 369-386.
    10. Chen, Ping-Yu & Chen, Sheng-Tung & Chen, Chi-Chung, 2012. "Energy consumption and economic growth—New evidence from meta analysis," Energy Policy, Elsevier, vol. 44(C), pages 245-255.
    11. Jaganath Behera, 2015. "Examined the Energy-Led Growth Hypothesis in India: Evidence from Time Series Analysis," Energy Economics Letters, Asian Economic and Social Society, vol. 2(4), pages 46-56, December.
    12. Cheratian, Iman & Goltabar, Saleh, 2017. "Energy Consumption and Regional Economic Growth: The Case of Iranian Manufacturing Sector," MPRA Paper 78315, University Library of Munich, Germany.
    13. Apergis, Nicholas & Tang, Chor Foon, 2013. "Is the energy-led growth hypothesis valid? New evidence from a sample of 85 countries," Energy Economics, Elsevier, vol. 38(C), pages 24-31.
    14. Camarero, Mariam & Forte, Anabel & Garcia-Donato, Gonzalo & Mendoza, Yurena & Ordoñez, Javier, 2015. "Variable selection in the analysis of energy consumption–growth nexus," Energy Economics, Elsevier, vol. 52(PA), pages 207-216.
    15. Salahuddin, Mohammad & Gow, Jeff, 2014. "Economic growth, energy consumption and CO2 emissions in Gulf Cooperation Council countries," Energy, Elsevier, vol. 73(C), pages 44-58.
    16. Chang, Ching-Chih & Soruco Carballo, Claudia Fabiola, 2011. "Energy conservation and sustainable economic growth: The case of Latin America and the Caribbean," Energy Policy, Elsevier, vol. 39(7), pages 4215-4221, July.
    17. Magazzino, Cosimo, 2011. "Energy consumption and aggregate income in Italy: cointegration and causality analysis," MPRA Paper 28494, University Library of Munich, Germany.
    18. Jalil, Abdul, 2014. "Energy–growth conundrum in energy exporting and importing countries: Evidence from heterogeneous panel methods robust to cross-sectional dependence," Energy Economics, Elsevier, vol. 44(C), pages 314-324.
    19. Saida Zaidi & Samia Gmiden & Kais Saidi, 2018. "How energy consumption affects economic development in select African countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(1), pages 501-513, January.
    20. Shahbaz, Muhammad & Hoang, Thi Hong Van & Mahalik, Mantu Kumar & Roubaud, David, 2017. "Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis," Energy Economics, Elsevier, vol. 63(C), pages 199-212.

    More about this item

    Keywords

    energy consumption; economic growth; Granger causality;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2019-04-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.