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Energy consumption at business cycle horizons: The case of the United States

  • Narayan, Paresh Kumar
  • Narayan, Seema
  • Smyth, Russell

In this paper, we propose a simple extension to a Keynesian type macro model by augmenting it with energy consumption. We show the relationship between energy consumption and output in a macroeconomic setting and ask the question: Do permanent shocks dominate changes in energy consumption and output at business cycle horizons for the United States? To achieve the goal of this paper, we undertake a variance decomposition analysis of shocks based on a common trend and common cycle framework within a vector error correction model. Our main finding is that permanent shocks explain the bulk of the variations in energy consumption and output at business cycle horizons for the United States.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 2 (March)
Pages: 161-167

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:2:p:161-167
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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