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On the methodology of energy-GDP Granger causality tests

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  • Beaudreau, Bernard C.

Abstract

Despite their growing technical sophistication and empirical breadth, Granger energy-GDP causality tests remain inconclusive, leaving unresolved the increasingly relevant debate over the role of energy or energy growth in economic growth. While historians and growth theorists point to the development of the steam engine, the electromagnetic motor and the ensuing energy deepening as a key contributing factor in economic growth, the existing tests provide little support for this view. This paper examines this debate, focusing particular attention on the underlying methodology, specifically on the measures of energy used. It is argued that existing tests, by regressing GDP growth on current and lagged levels of energy consumption growth, do not capture the essence of the historical record and recent work on energy and development [23,35]. A new energy metric in the form of energy availability is presented and discussed in detail.

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  • Beaudreau, Bernard C., 2010. "On the methodology of energy-GDP Granger causality tests," Energy, Elsevier, vol. 35(9), pages 3535-3539.
  • Handle: RePEc:eee:energy:v:35:y:2010:i:9:p:3535-3539
    DOI: 10.1016/j.energy.2010.03.062
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    2. Fallahi, Firouz, 2011. "Causal relationship between energy consumption (EC) and GDP: A Markov-switching (MS) causality," Energy, Elsevier, vol. 36(7), pages 4165-4170.
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    5. Ouedraogo, Nadia S., 2013. "Energy consumption and human development: Evidence from a panel cointegration and error correction model," Energy, Elsevier, vol. 63(C), pages 28-41.
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    11. Qiqing Wang & Cunbin Li, 2021. "An evolutionary analysis of new energy and industry policy tools in China based on large-scale policy topic modeling," PLOS ONE, Public Library of Science, vol. 16(5), pages 1-19, May.
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    More about this item

    Keywords

    Energy; GDP; Granger causality; Methodology;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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