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Is There Really Granger Causality Between Energy Use and Output?

  • Bruns, Stephan B.

    ()

    (Max Planck Institute of Economics)

  • Gross, Christian

    ()

    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Stern, David I.

    ()

    (Crawford School of Public Policy)

We carry out a meta-analysis of the very large literature on testing for Granger causality 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 or misspecification bias. Our model extends the standard meta-regression model for detecting genuine effects in the presence of publication biases using the statistical power trace by controlling for the tendency to over-fit vector autoregression models in small samples. Granger causality tests in these over-fitted models have inflated type I errors. We cannot find a genuine causal effect in the literature as a whole. However, there is a robust genuine effect from output to energy use when energy prices are controlled for.

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Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 11/2013.

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Length: 60 pages
Date of creation: Aug 2013
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Handle: RePEc:ris:fcnwpa:2013_011
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