Vortrag
Energy Consumption and Economic Growth: New Insights into Cointegration Relationship

Ansgar Belke, Christian Dreger, Frauke Dobnik

Energy Economy, Policies and Supply Security: Surviving the Global Economic Crisis : 11th IAEE European Conference
Vilnius, Litauen, 25.08.2010 - 28.08.2010



Abstract:
This paper examines the long-run relationship between energy consumption and real GDP, including energy prices, for 25 OECD countries from 1981 to 2007. The distinction between common factors and idiosyncratic components using principal component analysis allows to distinguish between developments on an international and a national level as drivers of the long-run relationship. Indeed, cointegration between the common components of the underlying variables indicates that international developments dominate the long-run relationship between energy consumption and real GDP. Furthermore, the results suggest that energy consumption is price-inelastic. Causality tests indicate the presence of a bi-directional causal relationship between energy consumption and economic growth.