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Frontiers in Energy

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Front. Energy    2014, Vol. 8 Issue (1) : 1-8    https://doi.org/10.1007/s11708-013-0290-6
RESEARCH ARTICLE
Causality between energy consumption and GDP in the U.S.: evidence from wavelet analysis
Alper ASLAN1, Nicholas APERGIS2(), Selim YILDIRIM3
1. Faculty of Economics and Administrative Sciences, Nevsehir University, Nevsehir 50300, Turkey
2. Department of Banking and Financial Management, University of Piraeus, Piraeus 18534, Greece
3. Faculty of Economics and Administrative Sciences, Anadolu University, Eskişehir 26470, Turkey
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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.
Keywords energy consumption      economic growth      wavelet analysis      granger causality     
Corresponding Author(s): Nicholas APERGIS   
Issue Date: 05 March 2014
 Cite this article:   
Alper ASLAN,Nicholas APERGIS,Selim YILDIRIM. Causality between energy consumption and GDP in the U.S.: evidence from wavelet analysis[J]. Front. Energy, 2014, 8(1): 1-8.
 URL:  
https://academic.hep.com.cn/fie/EN/10.1007/s11708-013-0290-6
https://academic.hep.com.cn/fie/EN/Y2014/V8/I1/1
Time scales Quarterly frequency
d1 2−4 quarters
d2 4−8 quarters
d3 8−16 quarters
d4 16−32 quarters
d5 32−64 quarters
d6 64−128 quarters
d7 128−256 quarters
d8 256−512 quarters
Tab.1  Frequency interpretation of time scales for quarterly data
Fig.1  Original series
Fig.2  Time scales of lrgdp and lpec
ADF KPSS
None Drift Trend Drift Trend
Lrgdp 3.5406 [2]
(0.9999)		 0.1993 [2]
(0.9718)		 −2.5783 [2]
(0.2909)		 1.5135 [10] 0.2447 [10]
Lpec 1.3711 [4]
(0.9571)		 −0.9880 [4]
(0.7568)		 −2.1506 [4]
(0.5132)		 1.4235 [10] 0.1523 [10]
dlrgdp −3.7427 [1]
(0.0002)		 −5.4533 [1]
(0.0000)		 −5.4676 [1]
(0.0001)		 0.1942 [7] 0.1172 [6]
Dlpec −6.0643 [3]
(0.0000)		 −6.2686 [3]
(0.0000)		 −6.2529 [3]
(0.0000)		 0.0954 [14] 0.0569 [14]
d1.lrgdp −4.9006 [14]
(0.0000)		 −4.8877 [14]
(0.0001)		 −4.8338 [14]
(0.0007)		 0.0895 [26] 0.0899 [26]
d1.lpec −6.5413 [10]
(0.0000)		 −6.5022 [10]
(0.0000)		 −6.4668 [10]
(0.0000)		 0.2970 [15] 0.2061 [15]
d2.lrgdp −5.2173 (11)
(0.0000)		 −5.2163 [11]
(0.0000)		 −5.0964 [11]
(0.0002)		 0.0801 [11] 0.0395 [11]
d2.lpec −3.9115 [23]
(0.0001)		 3.8537 [23]
(0.0032)		 3.8971 [23]
(0.0149)		 0.0650 [14] 0.0479 [14]
d3.lrgdp −3.0142 [14]
(0.0028)		 −3.0201 [14]
(0.0358)		 −4.6336 [17]
(0.0015)		 0.0308 [6] 0.0314 [6]
d3.lpec −4.1456 [17]
(0.0001)		 −4.0854 [17]
(0.0015)		 −5.2311 [21]
(0.0002)		 0.0390 [4] 0.0348 [4]
d4.lrgdp −1.9865 [10]
(0.0454)		 −5.2478 [9]
(0.0000)		 −5.9413 [9]
(0.0000)		 0.1357 [8] 0.0495 [8]
d4.lpec −3.7143 [9]
(0.0003)		 −3.6022 [9]
(0.0073)		 −4.4836 [9]
(0.0026)		 0.2023 [8] 0.0440 [8]
d5.lrgdp −2.9344 [2]
(0.0040)		 −2.9314 [2]
(0.0476)		 −3.1638 [2]
(0.1015)		 0.2309 [6] 0.2308 [6]
d5.lpec −3.7143 [9]
(0.0003)		 −3.6022 [9]
(0.0073)		 −4.4836 [9]
(0.0026)		 0.3957 [6] 0.0783 [6]
Tab.2  Unit root tests
Time scales (lags) Results Null hypothesis
lrgpd →lpec lpec →lrgdp
D5(18) lrgdp ↔lpec 174.9436 (0.0000) 126.5986 (0.0000)
D4(27) lrgdp ↔lpec 64.16327 (0.0001) 87.02860 (0.0000)
D3(10) lrgdp ↔lpec 46.77113 (0.0000) 19.87820 (0.0304)
D2(12) lrgdp ↔lpec 52.13191 (0.0000) 27.85945 (0.0058)
D1(3) lrgdp →lpec 18.11041 (0.0004) 3.751754 (0.2895)
Diff. log original series (4) lrgdp →lpec 33.85883 (0.0000) 8.702830 (0.0690)
Tab.3  Granger causality tests
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