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Modeling Economic Growth and Energy Consumption in Arab Countries: Cointegration and Causality Analysis

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  • Shahateet, Mohammed

Abstract

ABSTRACT: This paper examines the relationship between energy consumption and real economic growth in 17 Arab countries: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen. It uses an Auto Regressive Distributed Lag (ARDL) model to determine this econometric relationship using data during 1980-2011. After testing for unit root and cointegration, it identifies Granger causality between energy consumption and real economic growth. The analysis allowed for the verification of the four hypotheses that have been discussed widely in economic literature: Neutrality, Conservation, Growth, and Feedback hypotheses. Empirical findings support neutrality hypothesis in 16 out of 17 Arab countries. These findings, of no causality from economic growth to energy consumption and the other way round, imply that energy conservation will not have a significant impact on economic growth and economic growth will have insignificant effect on changes in energy consumption. They also suggest including other more important variables in the determination of economic growth, such as labor and capital.

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  • Shahateet, Mohammed, 2014. "Modeling Economic Growth and Energy Consumption in Arab Countries: Cointegration and Causality Analysis," MPRA Paper 57304, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57304
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    3. Thongphet Lamphayphan & Toshihisa Toyoda & Chris Czerkawsk & Phouphet Kyophilavong, 2015. "Export Supply of Electricity from Laos to Thailand: An Econometric Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 450-460.
    4. Waheed A. Banafea, 2014. "Structural Breaks and Causality Relationship between Economic Growth and Energy Consumption in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 726-734.
    5. Moataz Elshimy & Khadiga M. El-Aasar, 2020. "Carbon footprint, renewable energy, non-renewable energy, and livestock: testing the environmental Kuznets curve hypothesis for the Arab world," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(7), pages 6985-7012, October.
    6. Sunde, Tafirenyika, 2017. "Energy Consumption and Economic Growth Modelling in SADC Countries: An Application of the VAR Granger Causality," MPRA Paper 86505, University Library of Munich, Germany, revised 24 Nov 2017.
    7. ISAH, Ukwenya Shuaib & John Olu-Coris Aiyedogbon & Marvelous Aigbedion, 2024. "Impact of Electricity Power Consumption on Economic Growth in Nigeria: A Threshold Regression Analysis Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 64-76, August.
    8. Hasanov, Fakhri & Bulut, Cihan & Suleymanov, Elchin, 2017. "Review of energy-growth nexus: A panel analysis for ten Eurasian oil exporting countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 369-386.
    9. Mounir Belloumi & Atef Saad Alshehry, 2015. "Sustainable Energy Development in Saudi Arabia," Sustainability, MDPI, vol. 7(5), pages 1-18, April.
    10. Qusai Mohammad Qasim Alabed & Fathin Faizah Said & Zulkefly Abdul Karim & Mohd Azlan Shah Zaidi & Mohammed Daher Alshammary, 2021. "Energy–Growth Nexus in the MENA Region: A Dynamic Panel Threshold Estimation," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    11. Atef Saad Alshehry & Mounir Belloumi, 2014. "Investigating the Causal Relationship between Fossil Fuels Consumption and Economic Growth at Aggregate and Disaggregate Levels in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 531-545.
    12. Ahmed, Mumtaz & Azam, Muhammad, 2016. "Causal nexus between energy consumption and economic growth for high, middle and low income countries using frequency domain analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 60(C), pages 653-678.
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    More about this item

    Keywords

    economic growth; energy consumption; ARDL model; Granger causality; Arab countries;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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