Cointegration and causal relationships between energy consumption and output: assessing the evidence from Australia

Shahiduzzaman, Md and Alam, Khorshed (2012) Cointegration and causal relationships between energy consumption and output: assessing the evidence from Australia. Energy Economics, 34 (6). pp. 2182-2188. ISSN 0140-9883

Abstract

In this paper, we describe our investigation of the cointegration and causal relationships between energy consumption and economic output in Australia over a period of five decades. The framework used in this paper is the single-sector aggregate production function, which is the first comprehensive approach used in an Australian study of this type to include energy, capital and labour as separate inputs of production. The empirical evidence points to a cointegration relationship between energy and output and implies that energy is an important variable in the cointegration space, as are conventional inputs such as capital and labour. We also find some evidence of bidirectional causality between GDP and energy use. Although the evidence of causality from energy use to GDP was relatively weak when using the thermal aggregate of energy use, once energy consumption was adjusted for energy quality, we found strong evidence of Granger causality from energy use to GDP in Australia over the investigated period. The results are robust, irrespective of the assumptions of linear trends in the cointegration models, and are applicable for different econometric approaches.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: First published online 21 March 2012. Permanent restricted access to Published Version in accordance with the copyright policy of the publisher.
Depositing User: Dr Khorshed Alam
Faculty / Department / School: Historic - Faculty of Business and Law - School of Accounting and Finance
Date Deposited: 18 Sep 2012 07:34
Last Modified: 03 Jul 2013 01:08
Uncontrolled Keywords: energy consumption; GDP; cointegration; causality; Divisia index
Fields of Research (FOR2008): 14 Economics > 1402 Applied Economics > 140202 Economic Development and Growth
14 Economics > 1402 Applied Economics > 140205 Environment and Resource Economics
14 Economics > 1403 Econometrics > 140305 Time-Series Analysis
Socio-Economic Objective (SEO2008): B Economic Development > 85 Energy > 8507 Energy Conservation and Efficiency > 850703 Industrial Energy Conservation and Efficiency
Identification Number or DOI: doi: 10.1016/j.eneco.2012.03.006
URI: http://eprints.usq.edu.au/id/eprint/21043

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