Energy consumption, real income and temporal causality: results from a multi-country study based on cointegration and error-correction modelling techniques
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Unlike previous studies on the causal relationship between energy consumption and economic growth, this paper illustrates how the finding of cointegration (i.e. long-term equilibrium relationship) between these variables, may be used in testing Granger causality. Based on the most recent Johansen's multivariate cointegration tests preceded by various unit root or non-stationarity tests, we test for cointegration between total energy consumption and real income of six Asian economies: India, Pakistan, Malaysia, Singapore, Indonesia and the Philippines. Non-rejection of cointegration between variables rules out Granger non-causality and imples at least one way of Granger-causality, either unidirectional or bidirectionial. Secondly, by using a dynamic vector error-correction model, we then analyse the direction of Granger-causation and hence the within-sample Granger-exogeneity or endogeneity of each of the variables.
Energy consumption , Income , Granger temporal causality , Integration , Cointegration
Mohammed Masih, Abul Mansur & Masih, Rumi. (1996). Energy consumption, real income and temporal causality: results from a multi-country study based on cointegration and error-correction modelling techniques. Energy Economics, 18, pp. 165-183.
Elsevier Science B.V.