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Is There Really Granger Causality Between Energy Use and Output?

  • Stephan B. Bruns

    ()

    (University of Jena and Max-Planck Institute of Economics)

  • Christian Gross

    (RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN))

  • David I. Stern

    (Crawford School of Public Policy, The Australian National University Author-Email: david.stern@anu.edu.au)

We carry out a meta-analysis of the very large literature on Granger causality tests between energy use and economic output to determine if there is a genuine effect in this literature or whether the large number of apparently significant results is due to publication and misspecification bias. Our model extends the standard meta-regression model for detecting genuine effects using the statistical power trace in the presence of publication biases by controlling for the tendency to over-fit vector auto regression models in small samples. These over-fitted models have inflated type 1 errors. We find that models that include energy prices as a control variable find a genuine effect from output to energy use in the long-run. A genuine causal effect also seems apparent from energy to output when employment is controlled for and the Johansen procedure is used.

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Paper provided by Crawford School of Public Policy, The Australian National University in its series Crawford School Research Papers with number 1307.

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Date of creation: 08 Mar 2013
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Handle: RePEc:een:crwfrp:1307
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