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Energy consumption and economic growth: evidence from nonlinear panel cointegration and causality tests

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  • Omay, Tolga
  • Hasanov, Mubariz
  • Ucar, Nuri

Abstract

In this paper, we propose a nonlinear cointegration test for heterogeneous panels where the alternative hypothesis is an exponential smooth transition (ESTAR) model. We apply our tests for investigating cointegration relationship between energy consumption and economic growth for the G7 countries covering the period 1977-2007. Moreover, we estimate a nonlinear Panel Vector Error Correction Model in order to analyze the direction of the causality between energy consumption and economic growth. By using nonlinear causality tests we analyze the causality relationships in low economic growth and high economic growth regimes. Furthermore, we deal with the cross section dependency problem in both nonlinear panel cointegration test and nonlinear Panel Vector Error Correction Model.

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  • Omay, Tolga & Hasanov, Mubariz & Ucar, Nuri, 2012. "Energy consumption and economic growth: evidence from nonlinear panel cointegration and causality tests," MPRA Paper 37653, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37653
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    3. Sudeshna Ghosh, 2019. "Environmental Pollution, Income Inequality, and Household Energy Consumption: Evidence from the United Kingdom," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-31, June.
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    6. Nermin Yaþar, 2017. "The Relationship between Energy Consumption and Economic Growth: Evidence from Different Income Country Groups," International Journal of Energy Economics and Policy, Econjournals, vol. 7(2), pages 86-97.
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    8. Omay, Tolga & Yuksel, Asli & Yuksel, Aydin, 2015. "An empirical examination of the generalized Fisher effect using cross-sectional correlation robust tests for panel cointegration," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 18-29.
    9. Tolga Omay & Mubariz Hasanov & Asli Yuksel & Aydin Yuksel, 2016. "A Note on the Examination of the Fisher Hypothesis by Using Panel Co-Integration Tests with Break," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 13-26, June.
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    11. Kourtzidis, Stavros A. & Tzeremes, Panayiotis & Tzeremes, Nickolaos G., 2018. "Re-evaluating the energy consumption-economic growth nexus for the United States: An asymmetric threshold cointegration analysis," Energy, Elsevier, vol. 148(C), pages 537-545.
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    17. Mutascu, Mihai, 2016. "A bootstrap panel Granger causality analysis of energy consumption and economic growth in the G7 countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 63(C), pages 166-171.

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    Keywords

    Nonlinear panel cointegration; nonlinear Panel Vector Error Correction Model; cross section dependency;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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