Cerdeira Bento, João Paulo (2012): Cointegration Models Applied For Portugal’s Energy Consumption, Inward FDI and GDP Series (1980-2007).
Download (118kB) | Preview
This study runs a cointegration analysis on annual data from 1980 to 2007 to investigate the relationship between primary energy consumption, economic growth and net inflows of foreign direct investment with the Engle and Granger method, Stock-Watson dynamic ordinary least squares (DOLS), the bounds testing approach to cointegration and error correction modelling. The empirical results suggest that there is a stable long run linear cointegration relationship between these three variables. While income has a large and positive influence on energy consumption, the results point to a small but negative effect of foreign direct investment (FDI) on energy consumption. As for the short-run relationship among the series, the estimation and inference in the autoregressive distributed lag error correction model (ARDL) further confirm this link. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign investment can induce energy conservation without obstructing economic growth.
|Item Type:||MPRA Paper|
|Original Title:||Cointegration Models Applied For Portugal’s Energy Consumption, Inward FDI and GDP Series (1980-2007)|
|Keywords:||Energy consumption, Economic growth, Foreign direct investment, Cointegration|
|Subjects:||Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy|
|Depositing User:||Joao Paulo Cerdeira Bento|
|Date Deposited:||28 Sep 2012 20:13|
|Last Modified:||22 Jul 2016 10:10|
Andrew, D.A., 2003. Testing for parameter instability and structural change with unknown change point: a corrigendum. Econometrica, 71, 395-397.
Apergis, N., Payne, J.E., 2010. Energy consumption and growth in South America: Evidence from a panel error correction model. Energy Economics 32, 1421-1426.
Barrel, R., Pain, N., 1996. Domestic institution, agglomeration and foreign direct investment in Europe. European Economic Review 43, 29-45.
Basu, P., Chakraborty, C., Reagle, D., 2003. Domestic institution, agglomeration and foreign direct investment in Europe. European Economic Review 43, 29-45.
Belloumi, M., 2009. Energy consumption and GDP in Tunisia: Cointegration and causality analysis. Energy Policy 37, 2745-2753.
Blomstrom, E., Kokko, A., 1998. Multinational corporations and spillovers. Journal of Economic Surveys 12, 247-277.
Borzenstein, E., De Gregorio, J., Lee, J.W., 1998. How does foreign direct investment affect economic growth? Journal of International Economics 45, 115-135.
Cravinho, A.M., Marques, R.C., Cruz, C.O., 2011. Public-private partnerships for wind power generation: the Portuguese case. Energy Policy 39, 94-104.
Dickey, D.A., Fuller, W.A., 1979. Distributions of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74, 427-81.
Dunning, J.H., 1993. Multinational enterprises and the Global Economy. Workingham: Addison-Wesley.
De Mello, L.R., 1999. Foreign direct investment-led growth: Evidence from time series and panel data. Oxford Economic Papers 51, 131-151.
Engle, R., Granger, C.W.J., 1987. Co-integration and error correction: representation, estimation and testing. Econometrica 55, 251-276.
Eskland, G., Harrison, A., 2003. Moving to greener pastures? Multinationals and the pollution haven hypothesis. Journal of Development Economics 70(1), 1-23.
Fisher-Vanden, K., Jefferson, G.H., Liu, H., Tao, Q., 2004. What is driving China´s decline in energy intensity? Resource and Energy Economics 26, 77-97.
Harris, R., Sollis, R., 2003. Applied Time Series Modelling and Forecasting. Wiley.
Hübler, M., Keller, A., 2008. Energy savings via FDI? Empirical evidence from developing countries. Kiel Working Papers No. 1393.
Johansen S., Juselius K., 1990. Maximum Likelihood Estimation and Inference on Cointegration, With Application to the Demand for Money. Oxford Bulletin of Economics and Statistics 52(2), 169-210.
Johansen, S., 1991. Estimating and Hypothesis Testing of Cointegrating Vectors Autoregressive Models. Econometrica 59, 1551-1589.
MacKinnon, J.G., 1991. Critical values for cointegration tests. Chapter 13 in R.F. Engle and C.W.J. Granger (eds.). Long-Run Economic Relationships: Readings in Cointegration. Oxford University Press.
Mielnik, O., Goldemberg, J., 2002. Foreign direct investment and decoupling between energy and gross domestic product in developing countries. Energy Policy 30, 87-89.
Nair-Reichert, U., Weinhold, D., 2001. Causality tests for cross-country panels: A new look on FDI and economic growth in developing countries. Oxford Bulletin of Economics and Statistics 63, 153-171.
Narayan, P.K., 2004. Reformulating critical values for the bounds F-statistics approach to cointegration: an application to the tourism demand model for Fiji. Discussion Papers. Department of Economics. Monash University. Australia.
Narayan, P.K., Narayan, S., Prasad, A., 2008. A structural VAR analysis of electricity consumption and real GDP: Evidence from the G7 countries. Energy Policy 36, 2765-2769.
Ozturk, I., 2010. A literature survey on energy-growth nexus. Energy Policy 38, 340-349.
Payne, J.E., 2010. Survey of the international evidence on the causal relationship between energy consumption and growth. Journal of Economic Studies 37(1), 53–95.
Phillips, P.C.B., Perron, P., 1988. Testing for a unit root in time series regression. Biometrika 75, 335-346.
Pereira, A.M., Pereira, R.M.M., 2010. Is fuel-switching a no-regrets environmental policy? VAR evidence on carbon dioxide emissions, energy consumption and economic performance in Portugal. Energy Economics 32, 227-242.
Pesaran, M.H, Shin, Y., 1999. Autoregressive distributed lag modelling approach to cointegration analysis. DAE Working Paper Series 9514. Department of Applied Economics. University of Cambridge.
Pesaran, M.H, Shin, Y., Smith R.J., 2001. Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics 16, 289-326.
Stock, J., Watson, M.W., 1993. A simple estimator of cointegrating vectors in higher order integrated systems. Econometrica, 61(4), 783-820.
Tang, C.F., 2009. Electricity consumption, income, foreign direct investment, and population in Malaysia. New evidence from multivariate framework analysis. Journal of Economic Studies 36(4), 371-382.
Trevino, L.J., Len, J., Daniels, H., Arbelaez, H., Upadhyaya, K.P., 2002. Market reform and foreign direct investment in Latin America: Evidence from an error correction model. International Trade Journal 16(4), 367-392.
Unctad, 2010. World Investment Report 2010. Investing in a low-carbon economy. United Nations.
Yuan, J., Zhao, C., Yu, S., Hu, Z., 2007. Electricity consumption and economic growth in China: Cointegration and co-features analysis. Energy Economics 29, 1179-1191.
Xu, B., 2000. Multinational enterprises, technology diffusion, and host country productivity growth. Journal of Development Economics 62, 477-493.