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Energy consumption and aggregate income in Italy: cointegration and causality analysis

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  • Magazzino, Cosimo

Abstract

The aim of this article is to assess the empirical evidence of the nexus between aggregate income and energy consumption for Italy during the period 1970-2009, using a time-series approach. After a brief introduction, a survey of the economic literature on this issue is shown, before discussing the data and intro-ducing some econometric techniques. Stationarity tests reveal that both series are non-stationary, or I(1). Moreover, we found a cointegration relationship between the two variables. The short-run dynamics of the variables show that the flow of causality runs from energy use to GDP, and there is a long-run bi-directional causal relationship (or feedback effect) between the two series. Consequently, we conclude that energy is a limiting factor to GDP growth in Italy.

Suggested Citation

  • Magazzino, Cosimo, 2011. "Energy consumption and aggregate income in Italy: cointegration and causality analysis," MPRA Paper 28494, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:28494
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    More about this item

    Keywords

    Energy policies; energy consumption; GDP; stationarity; cointegration; causality; Italy;
    All these keywords.

    JEL classification:

    • N54 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Europe: 1913-
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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