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Causality between energy consumption and GDP in the U.S.: evidence from wavelet analysis

Causality between energy consumption and GDP in the U.S.: evidence from wavelet analysis Abstract This study investigates the dynamic causal relationship between energy consumption and economic growth in the U.S. at different time scales. The main novelty of the study is that this paper complements the existing studies on the nexus between energy consumption and economic growth by employing the wavelet transformation to obtain different time scales in order to investigate causality between energy consumption and economic growth. This method is first developed by Ramsey and Lampart. Their approach consists of first decomposing the series into time scales by wavelet filters and testing causality of each time scale with the pertinent time scale of the other series separately. The data span from 1973q1 to 2012q1 on a quarterly basis. The main empirical insight is that the causal relationship is stronger at finer time scales, whereas the relationship is less and less apparent at longer time horizons. The results indicate that energy consumption causes economic growth, while the reverse is not true at the original frequency of the data. At the very finest scale the same result arises. However, at coarser scales feedback is observed. In particular, at intermediate time scales the evidence indicates that energy consumption causes economic growth, while the reverse is also true. These empirical findings are expected to be of high importance in terms of the effective design and implementation of energy and environmental policies, especially when a number of countries in the pursuit of high economic growth targets do not pay any serious attention on environmental issues. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Frontiers in Energy" Springer Journals

Causality between energy consumption and GDP in the U.S.: evidence from wavelet analysis

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Publisher
Springer Journals
Copyright
2013 Higher Education Press and Springer-Verlag Berlin Heidelberg
ISSN
2095-1701
eISSN
2095-1698
DOI
10.1007/s11708-013-0290-6
Publisher site
See Article on Publisher Site

Abstract

Abstract This study investigates the dynamic causal relationship between energy consumption and economic growth in the U.S. at different time scales. The main novelty of the study is that this paper complements the existing studies on the nexus between energy consumption and economic growth by employing the wavelet transformation to obtain different time scales in order to investigate causality between energy consumption and economic growth. This method is first developed by Ramsey and Lampart. Their approach consists of first decomposing the series into time scales by wavelet filters and testing causality of each time scale with the pertinent time scale of the other series separately. The data span from 1973q1 to 2012q1 on a quarterly basis. The main empirical insight is that the causal relationship is stronger at finer time scales, whereas the relationship is less and less apparent at longer time horizons. The results indicate that energy consumption causes economic growth, while the reverse is not true at the original frequency of the data. At the very finest scale the same result arises. However, at coarser scales feedback is observed. In particular, at intermediate time scales the evidence indicates that energy consumption causes economic growth, while the reverse is also true. These empirical findings are expected to be of high importance in terms of the effective design and implementation of energy and environmental policies, especially when a number of countries in the pursuit of high economic growth targets do not pay any serious attention on environmental issues.

Journal

"Frontiers in Energy"Springer Journals

Published: Mar 1, 2014

References