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Revisiting Energy Consumption and GDP: Evidence from Dynamic Panel Data Analysis

Nayan, Sabri and Kadir, Norsiah and Ahmad, Mahyudin and Abdullah, Mat Saad (2013): Revisiting Energy Consumption and GDP: Evidence from Dynamic Panel Data Analysis. Forthcoming in: Procedia Economics and Finance (October 2013)

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In recent years the issues of energy consumption and economic development have become the concern of many parties, particularly policy makers. The empirical outcomes of previous studies examining the relationship between energy consumption and economic growth have been inconclusive and conflicting due to different sample periods, variables used, countries studied and econometric techniques employed. Utilising dynamic panel data GMM-system estimator on datasets of selected 23 countries across 12 years ranging from 2000-2011, this paper shows evidence of uni-directional causality between energy consumption and GDP. In energy consumption model, the GDP is found to significantly determine energy consumption, whereas in the GDP model, energy consumption has however less significant effect on GDP. Energy price and investment are the other important determinants of energy consumption and income, respectively.

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