Causality Between Energy and Output in the Long-Run

• Though there is a very large literature examining whether energy use Granger causes economic output or vice versa, it is fairly inconclusive. Almost all existing studies use relatively short time series, or panels with a relatively small time dimension. We apply Granger causality and cointegration techniques to a Swedish time series dataset spanning 150 years to test whether increases in energy use and energy quality have driven economic growth or vice versa. We show that these techniques are very sensitive to variable definition, choice of additional variables in the model, sample periods and size, and the introduction of structural breaks. The relationship between energy and growth may also have changed over time - energy causes output in the full sample while output causes energy use in recent smaller samples. Energy prices have a more robust causal impact on both energy use and output.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Ekonomisk historia (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economic History (hsv//eng)

Keyword

Energy

macroeconomics

Granger causality

cointegration

Sweden

time series

causality

Publication and Content Type

art (subject category)

ref (subject category)