Energy consumption and aggregate income in Italy: cointegration and causality analysis

Magazzino, Cosimo (2011): Energy consumption and aggregate income in Italy: cointegration and causality analysis.

Abstract

The aim of this article is to assess the empirical evidence of the nexus between aggregate income and energy consumption for Italy during the period 1970-2009, using a time-series approach. After a brief introduction, a survey of the economic literature on this issue is shown, before discussing the data and intro-ducing some econometric techniques. Stationarity tests reveal that both series are non-stationary, or I(1). Moreover, we found a cointegration relationship between the two variables. The short-run dynamics of the variables show that the flow of causality runs from energy use to GDP, and there is a long-run bi-directional causal relationship (or feedback effect) between the two series. Consequently, we conclude that energy is a limiting factor to GDP growth in Italy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Energy policies; energy consumption; GDP; stationarity; cointegration; causality; Italy
• Subjects: N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries > N54 - Europe: 1913-; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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