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The causal link between energy and output growth: Evidence from Markov switching Granger causality

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  • Kandemir Kocaaslan, Ozge

Abstract

In this paper we empirically investigate the causal link between energy consumption and economic growth employing a Markov switching Granger causality analysis. We carry out our investigation using annual U.S. real GDP, total final energy consumption and total primary energy consumption data which cover the period between 1968 and 2010. We find that there are significant changes in the causal relation between energy consumption and economic growth over the sample period under investigation. Our results show that total final energy consumption and total primary energy consumption have significant predictive content for real economic activity in the U.S. economy. Furthermore, the causality running from energy consumption to output growth seems to be strongly apparent particularly during the periods of economic downturn and energy crisis. We also document that output growth has predictive power in explaining total energy consumption. Furthermore, the power of output growth in predicting total energy consumption is found to diminish after the mid of 1980s.

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  • Kandemir Kocaaslan, Ozge, 2013. "The causal link between energy and output growth: Evidence from Markov switching Granger causality," Energy Policy, Elsevier, vol. 63(C), pages 1196-1206.
  • Handle: RePEc:eee:enepol:v:63:y:2013:i:c:p:1196-1206 DOI: 10.1016/j.enpol.2013.08.086
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    Cited by:

    1. Rafiq, Shudhasattwa & Sgro, Pasquale & Apergis, Nicholas, 2016. "Asymmetric oil shocks and external balances of major oil exporting and importing countries," Energy Economics, Elsevier, vol. 56(C), pages 42-50.
    2. Kyophilavong, Phouphet & Shahbaz, Muhammad & Anwar, Sabeen & Masood, Sameen, 2015. "The energy-growth nexus in Thailand: Does trade openness boost up energy consumption?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 46(C), pages 265-274.
    3. Shahbaz, Muhammad & Hussain Shahzad, Syed Jawad & Jammazi, Rania, 2016. "Nexus between U.S Energy Sources and Economic Activity: Time-Frequency and Bootstrap Rolling Window Causality Analysis," MPRA Paper 68724, University Library of Munich, Germany, revised 08 Jan 2016.
    4. RodrĂ­guez-Caballero, Carlos Vladimir & Ventosa-SantaulĂ ria, Daniel, 2017. "Energy-growth long-term relationship under structural breaks. Evidence from Canada, 17 Latin American economies and the USA," Energy Economics, Elsevier, vol. 61(C), pages 121-134.
    5. repec:eee:rensus:v:75:y:2017:i:c:p:145-156 is not listed on IDEAS
    6. Florian Fizaine & Victor Court, 2016. "The energy-economic growth relationship: a new insight from the EROI perspective," Working Papers 1601, Chaire Economie du climat.
    7. Phiri, Andrew & Nyoni, Botha, 2014. "The electricity-growth nexus in South Africa: Evidence from asymmetric co-integration and co-feature analysis," MPRA Paper 56145, University Library of Munich, Germany.
    8. Fizaine, Florian & Court, Victor, 2016. "Energy expenditure, economic growth, and the minimum EROI of society," Energy Policy, Elsevier, vol. 95(C), pages 172-186.
    9. Rahman, Md. Saifur & Noman, Abu Hanifa Md. & Shahari, Farihana & Aslam, Mohamed & Gee, Chan Sok & Isa, Che Ruhana & Pervin, Sajeda, 2016. "Efficient energy consumption in industrial sectors and its effect on environment: A comparative analysis between G8 and Southeast Asian emerging economies," Energy, Elsevier, vol. 97(C), pages 82-89.

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