Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/36712 
Year of Publication: 
2010
Series/Report no.: 
DIW Discussion Papers No. 1017
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
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.
Subjects: 
Energy consumption
panel unit roots
panel cointegration
vector error-correction models
Granger causality
JEL: 
C33
O13
Q43
Document Type: 
Working Paper

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