Energy consumption-GDP nexus: heterogeneous panel causality analysis

Abstract

Existing studies examining the Granger causality relationship between energy consumption and GDP use a panel of countries but implicitly assume that the panels are homogeneous. This paper extends the Granger causality relationship between energy consumption and GDP by taking into account panel heterogeneity. For this purpose we use a large panel of 79 countries for the period 1980-2007. Specifically we examine four different causal relationships: homogeneous non-causality homogeneous causality heterogeneous non-causality and heterogeneous causality. The results show that roughly seven-tenths of the countries exhibit bi-directional Granger causality two-tenths exhibit no Granger causality and one-tenths exhibit unidirectional Granger causality. (C) 2012 Elsevier B.V. All rights reserved.