Energy consumption and Economic Growth Nexus in the Baltic Countries: Causality Approach
Abstract. The relationship between energy consumption and economic growth has been a hot issue in academic research. The results of the investigations have been varied due to quite different national economic development and diversity of research methods as well. This paper investigates the causal relationship between energy consumption and economic growth in the Baltic countries, such as Lithuania, Latvia and Estonia in the period of year between 1995 and 2012. To that end, Granger causality test is applied in order to suggest which variable in the model has significant impact on the future value of other variable in the system. Based on the causal relationship, regression model has been employed for the estimation of interrelationship between energy consumption and economic growth. The empirical results could be summarized as following: 1) in terms of correlation analysis between energy consumption and economic growth, there is a weak and insignificant relationship for Lithuania, strong and significant for Latvia and moderate one for Estonia; 2) in terms of causality running from GDP to energy consumption, the causal relationship exists for Estonia. The main implication of this finding is that the energy conservation policies will not have impact on economic growth; moreover, the results of the research highlight the absence of Granger causality between variables observed in the case of Lithuania and Latvia. In this light, national energy policies will not have impact on economic growth as well as economic growth will not has influence on energy consumption.
Index Terms: energy consumption, economic growth, Granger causality, regression analysis.JEL: C10, C12, O47, Q43
Akinlo, A. E. (2009). Electricity consumption and economic growth in Nigeria: Evidence from co-integration and co-feature analysis, Journal of Policy Modeling 31: 681–693.
Apergis, N.; Payne, J. E. (2012). Renewable and non-renewable energy consumption-growth nexus: Evidence from a panel error correction model, Energy Economics, Elsevier 34(3): 733-738.
Bartleet, M.; Gounder, R. (2010). Energy consumption and economic growth in New Zealand: results of trivariate and multivariate models, Energy Policy 38: 3508–3517.
Belke, A.; Dobnik, F.; Dreger, C. (2011). Energy consumption and economic growth: new insights into the cointegration relationship, Energy Economics 33(5):782–789.
Bobinaitė, V.; Juozapavičienė, A.; Konstantinavičiūtė, I. (2011). Assessment of causality relationship between renewable energy consumption and economic growth in Lithuania. Engineering Economics 22(5): 510-518. http://dx.doi.Org/10.5755/j01.ee.22.5.969.
Bojnec, S.; Papler, D. (2011). Economic efficiency, energy consumption and sustainable development, Journal of Business Economics and Management 12: 353-374. doi:10.3846/16111699.2011.573278.
Campo, J.; Sarmiento, V. (2013). The relationship between energy consumption and GDP: evidence from a panel of 10 Latin American countries, Latin American Journal of Economics 50 (2): 233-255.
Chen, P.Y.; Chen, S.T.; Chen, C.C. (2012). Energy consumption and economic growth – new evidence from meta analysis, Energy Policy 44: 245 – 255.
Chen, S.T.; Kuo, H.I.; Chen, C.C. (2007). The relationship between GDP and electricity consumption in 10 Asian countries, Energy Policy 35: 2611–2621.
Chontanawat, J.; Hunt, L. C.; Pierse, R. (2008). Does energy consumption cause economic growth?: evidence from a systematic study of over 100 countries, Journal of Policy Modeling, Elsevier 30(2): 209-220.
Dudzevičiūtė, G. (2012). Lithuanian security оf energy supply and cоnsumptiоn in the cоntext оf the Eurоpean Uniоn cоuntries. Internatiоnal Scientific Cоnference “Whither Оur Ecоnоmies” Оctоber 15-16. Prоceedings: p. 32-38. ISSN (оnline) 2029-8501.
Dudzevičiūtė, G. (2013). The research оf the ecоnоmic structural changes: energy cоnsumptiоn aspect, Jоurnal оf Security and Sustainability Issues 2(4): 13–23. http://dx.dоi.оrg/10.9770/jssi.2013.2.4(2).
Eddrief-Cherfi, S.; Kourbali, B. (2012). Energy consumption and economic growth in Algeria: cointegration and causality analysis. International Journal of Energy Economics and Policy 2 (4): 238-249.
Eggoh, J.C.; Bangake, C.; Rault, C. (2011). Energy consumption and economic growth revisited in African countries, Energy Policy 39 (11): 7408-7421.
Esso, L.J. (2010). Threshold cointegration and causality relationship between energy use and growth in seven African countries, Energy Economics 30: 2391–2400.
Eurostat database on energy indicators. Available on the Internet: http://epp.eurostat.ec.europa.eu/portal/page/portal/energy/data/database.
Fang, Y. (2011). Economic welfare impacts from renewable energy consumption: the China experience, Renewable and Sustainable Energy Reviews 15 (9): 5120–5128.
Fuinhas, J.; Marques, A. C. (2012). An ARDL approach to the oil and growth nexus: Portuguese evidence, Energy Sources 7(3): 282-291.
Georgantopoulas, A. (2012). Electricity consumption and economic growth: analysis and forecasts using VAR/VEC approach for Greece with capital formation, International Journal of Energy Economics and Policy 2 (4): 263-278.
Granger, C.W.J. (1969). Investigating causal relations by econometric models and crossspectral methods, Econometrica 37 (3): 424–438.
Gurgul, H.; Lach, L. (2011). The electricity consumption versus economic growth of the Polish economy, Energy Economics 34 (2): 500-510.
Ho, Chun-Yu.; Siu, Kam Wing, (2007). A dynamic equilibrium of electricity consumption and GDP in Hong Kong: An empirical investigation, Energy Policy, Elsevier 35(4): 2507-2513.
Kozhan, R. (2010). Financial Econometrics. Roman Kozhan & Ventus Publishing ApS. 119 p.
Lee, Chien-Chiang; Chiu, Yi-Bin, 2011. Oil prices, nuclear energy consumption, and economic growth: new evidence using a heterogeneous panel analysis, Energy Policy, Elsevier 39(4): 2111-2120.
Li, J.; Li, Z. (2011). A causality analysis of coal consumption and economic growth for China and India, Natural Resources 2: 54-60.
Lin, B.; Wesseh, P.K. (2014). Energy consumption and economic growth in South Africa reexamined: a nonparametric testing apporach, Renewable and sustainable energy reviews 40: 840-850.
Munim, J. M. A.; Hakim, M. M.; Abdullah-Al-Mamun, M. 2010. Analysis of energy consumption and indicators of energy use in Bangladesh, Economic Change Restructuring 43: 275–302.
Odhiambo, N. (2010). Energy consumption, prices and economic growth in three SSA countries: A comparative study, Energy Policy 38 (5): 2463-2469.
Odularu, G. O.; Okonkwo, Ch. (2009). Does energy consumption contribute to economic performance? Empirical evidence from Nigeria, Journal of Economics and Business 12 (2): 43-79.
Ouedraogo N. S. (2013). Energy consumption and economic growth: evidence from the economic community of West African States, Energy Economics 36: 637–647.
Ozkan, G. (2011). The Nabucco project within the context of energy supply security and international politics, China-USA Business Review, 10 (8): 689-699.
Ozturk, I. (2010). A literature survey on energy-growth nexus, Energy Policy 38: 340–349.
Payne, J. E. (2010). Survey of the international evidence on the causal relationship between energy consumption and growth, Journal of Economic Studies 37(1): 53–95.
Squalli, J. (2007). Electricity consumption and economic growth: bounds and causality analyses of OPEC members, Energy Economics 29 (6): 1192–1205.
Stern, D. I. (2011). From correlation to Granger causality. Crawford School Research Paper No 13. 37 p.
Tang, C.F.; Tan, E. CH. (2012). Electricity consumption and economic growth in Portugal: evidence from a multivariate framework analysis, Energy Journal 33 (4), 27 p. http://dx.doi.org/10.5547/01956522.214.171.124.
Tsani, S. (2010). Energy consumption and economic growth: a causality analysis for Greece. Energy Economics 32: 582- 590.
Yildirim, E.; Sukruoglu, D.; Aslan, A. (2014). Energy consumption and economic growth in the next 11 countries: the bootstrapped autoregressive metric causality approach, Energy Economics 44: 14-21.
Zhixin, Z.; Xin, R. (2011). Causal relationships between energy consumption and economic growth, Energy Procedia 5: 2065-2071.
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
ISSN 1313-4787 (Print)