The relationship between energy consumption and economic growth has attracted a lot of interest given its policy relevance, particularly with respect to the growing concerns over energy scarcity and energy’s environmental costs. The aim of this paper is to investigate evidence for causality between energy consumption and economic growth within a multivariate framework for 23 developed countries and 16 developing countries. The application of the vector error-correction model (VECM) for Granger causality reveals that the causality directions in the 39 countries are mixed. However, the findings have important policy implications. Given that the causality from economic growth to energy consumption is more prevalent in developed countries than in developing countries, there is relatively more scope for more energy conservation measure as a feasible policy tool for these groups of countries. This means that an energy conservation policy may be feasible without compromising economic growth.
|Keywords:||Energy Consumption, Economic Growth, Causality, Vector Error Correction Model|
Lecturer, Department of Economics, Faculty of Management and Economics, Universiti Malaysia Terengganu, Kuala Terengganu, Terengganu, Malaysia
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