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A reassessment of energy and GDP relationship: the case of Australia

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  • Md. Shahiduzzaman
  • Khorshed Alam

Abstract

This paper investigates the long- and short-run relationships between energy consumption and economic growth in Australia using the bound testing and the ARDL approach. The analytical framework utilized in this paper includes both production and demand side models and a unified model comprising both production and demand side variables. The energy–GDP relationships are investigated at aggregate as well as several disaggregated energy categories, such as coal, oil, gas and electricity. The possibilities of one or more structural break(s) in the data series are examined by applying the recent advances in techniques. We find that the results of the cointegration tests could be affected by the structural break(s) in the data. It is, therefore, crucial to incorporate the information on structural break(s) in the subsequent modelling and inferences. Moreover, neither the production side nor the demand side framework alone can provide sufficient information to draw an ultimate conclusion on the cointegration and causal direction between energy and output. When alternative frameworks and structural break(s) in time series are explored properly, strong evidence of a bidirectional relationship between energy and output can be observed. The finding is true at both the aggregate and the disaggregate levels of energy consumption. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Md. Shahiduzzaman & Khorshed Alam, 2014. "A reassessment of energy and GDP relationship: the case of Australia," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 16(2), pages 323-344, April.
    • Handle: RePEc:spr:endesu:v:16:y:2014:i:2:p:323-344
    DOI: 10.1007/s10668-013-9479-4
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    Cited by:

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    3. Md Shahiduzzaman & Allan Layton & Khorshed Alam, 2015. "On the contribution of information and communication technology to productivity growth in Australia," Economic Change and Restructuring, Springer, vol. 48(3), pages 281-304, November.
    4. Ali, Mohammad Afshar & Alam, Khorshed & Taylor, Brad & Rafiq, Shuddhasattwa, 2020. "Does ICT maturity catalyse economic development? Evidence from a panel data estimation approach in OECD countries," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 163-174.
    5. Mounir Ben Mbarek & Kais Saidi & Rochdi Feki, 2018. "How Effective Are Renewable Energy in Addition of Economic Growth and Curbing CO2 Emissions in the Long Run? A Panel Data Analysis for Four Mediterranean Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(3), pages 754-766, September.
    6. Solarin, Sakiru Adebola & Ozturk, Ilhan, 2016. "The relationship between natural gas consumption and economic growth in OPEC members," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 1348-1356.
    7. Xin Yan & Min Chen & Mu-Yen Chen, 2019. "Coupling and Coordination Development of Australian Energy, Economy, and Ecological Environment Systems from 2007 to 2016," Sustainability, MDPI, vol. 11(23), pages 1-13, November.
    8. Ogali, Oscar I.O. & Okoro, Emeka E. & Olafuyi, Saburi G., 2023. "Assessing consensus on nexus between natural gas consumption and economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 187(C).

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    More about this item

    Keywords

    Energy consumption; GDP; Cointegration; Causality;
    All these keywords.

    JEL classification:

    • O56 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Oceania
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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