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Energy Consumption and Economic Growth: New Insights into the Cointegration Relationship

  • Ansgar Belke
  • Christian Dreger
  • Frauke de Haan

This paper examines the long-run relationship between energy consumption and real GDP, including energy prices, for 25 OECD countries from 1981 to 2007. The distinction between common factors and idiosyncratic components using principal component analysis allows to distinguish between developments on an international and a national level as drivers of the long-run relationship. Indeed, cointegration between the common components of the underlying variables indicates that international developments dominate the long-run relationship between energy consumption and real GDP. Furthermore, the results suggest that energy consumption is price-inelastic. Causality tests indicate the presence of a bi-directional causal relationship between energy consumption and economic growth.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.357400.de/dp1017.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1017.

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Length: 16 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp1017
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