IDEAS home Printed from
   My bibliography  Save this paper

Cointegration Models Applied For Portugal’s Energy Consumption, Inward FDI and GDP Series (1980-2007)


  • Cerdeira Bento, João Paulo


This study runs a cointegration analysis on annual data from 1980 to 2007 to investigate the relationship between primary energy consumption, economic growth and net inflows of foreign direct investment with the Engle and Granger method, Stock-Watson dynamic ordinary least squares (DOLS), the bounds testing approach to cointegration and error correction modelling. The empirical results suggest that there is a stable long run linear cointegration relationship between these three variables. While income has a large and positive influence on energy consumption, the results point to a small but negative effect of foreign direct investment (FDI) on energy consumption. As for the short-run relationship among the series, the estimation and inference in the autoregressive distributed lag error correction model (ARDL) further confirm this link. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign investment can induce energy conservation without obstructing economic growth.

Suggested Citation

  • Cerdeira Bento, João Paulo, 2012. "Cointegration Models Applied For Portugal’s Energy Consumption, Inward FDI and GDP Series (1980-2007)," MPRA Paper 41619, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:41619

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. Martins, Ana Cravinho & Marques, Rui Cunha & Cruz, Carlos Oliveira, 2011. "Public-private partnerships for wind power generation: The Portuguese case," Energy Policy, Elsevier, vol. 39(1), pages 94-104, January.
    2. de Mello, Luiz R, Jr, 1999. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 133-151, January.
    3. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-277, July.
    4. James E. Payne, 2010. "Survey of the international evidence on the causal relationship between energy consumption and growth," Journal of Economic Studies, Emerald Group Publishing, vol. 37(1), pages 53-95, January.
    5. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    6. Yuan, Jiahai & Zhao, Changhong & Yu, Shunkun & Hu, Zhaoguang, 2007. "Electricity consumption and economic growth in China: Cointegration and co-feature analysis," Energy Economics, Elsevier, vol. 29(6), pages 1179-1191, November.
    7. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
    8. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    9. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    10. Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-171, May.
    11. Chor Foon Tang, 2009. "Electricity consumption, income, foreign direct investment, and population in Malaysia: New evidence from multivariate framework analysis," Journal of Economic Studies, Emerald Group Publishing, vol. 36(4), pages 371-382, September.
    12. Marvão Pereira, Alfredo & Marvão Pereira, Rui Manuel, 2010. "Is fuel-switching a no-regrets environmental policy? VAR evidence on carbon dioxide emissions, energy consumption and economic performance in Portugal," Energy Economics, Elsevier, vol. 32(1), pages 227-242, January.
    13. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    14. Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
    15. Apergis, Nicholas & Payne, James E., 2010. "Energy consumption and growth in South America: Evidence from a panel error correction model," Energy Economics, Elsevier, vol. 32(6), pages 1421-1426, November.
    16. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    17. Hübler, Michael & Keller, Andreas, 2010. "Energy savings via FDI? Empirical evidence from developing countries," Environment and Development Economics, Cambridge University Press, vol. 15(01), pages 59-80, February.
    18. Mielnik, Otavio & Goldemberg, Jose, 2002. "Foreign direct investment and decoupling between energy and gross domestic product in developing countries," Energy Policy, Elsevier, vol. 30(2), pages 87-89, January.
    19. Belloumi, Mounir, 2009. "Energy consumption and GDP in Tunisia: Cointegration and causality analysis," Energy Policy, Elsevier, vol. 37(7), pages 2745-2753, July.
    20. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    21. Narayan, Paresh Kumar & Narayan, Seema & Prasad, Arti, 2008. "A structural VAR analysis of electricity consumption and real GDP: Evidence from the G7 countries," Energy Policy, Elsevier, vol. 36(7), pages 2765-2769, July.
    22. Xu, Bin, 2000. "Multinational enterprises, technology diffusion, and host country productivity growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 477-493, August.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Energy consumption; Economic growth; Foreign direct investment; Cointegration;

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:41619. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.