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Energy Use and GDP in Israel

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  • Cosimo Magazzino

Abstract

The paper aims to study the relationship between energy use and GDP in the period 1971-2007 for Israel with a time-series approach. Stationarity and unit root tests reveal that both series are non-stationary, or I(1). Moreover, since both series show the presence of a structural break, the Gregory and Hansen cointegration test has been conducted. The results evidence the presence of a long-run relationship. Causality tests reveal that the “conservation hypothesis” emerges, since the causality flow runs from aggregate income to energy use. The IRFs analysis evidences that a shock to the energy use affects GDP for one period, but dies out very quickly. While shocks to GDP create a smaller but significant response in the energy use, although it falls to zero in few periods. Finally, we calculate with an ECM that the total long-run multiplier is 0.95. The energy use will increase to correct the disequilibrium, with 68% of the (remaining) deviation corrected in each subsequent time period. In addition, a one-unit increase in the GDP immediately produces a 0.18 unit increase in the energy use.

Suggested Citation

  • Cosimo Magazzino, 2015. "Energy Use and GDP in Israel," Journal of Sustainable Development, Canadian Center of Science and Education, vol. 8(9), pages 1-89, September.
    • Handle: RePEc:ibn:jsd123:v:8:y:2015:i:9:p:89
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    References listed on IDEAS

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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