Munich Personal RePEc Archive

Natural Gas Consumption and Economic Growth Nexus: The Role of Exports, Capital and Labor in France

Shahbaz, Muhammad and Farhani, Sahbi and Rahman, Mohammad Mafizur (2013): Natural Gas Consumption and Economic Growth Nexus: The Role of Exports, Capital and Labor in France.

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Abstract

The present study investigates the relationship between natural gas consumption and economic growth using Cobb-Douglas production function by incorporating exports, capital and labor as additional factors of production. We applied the ARDL bounds testing approach to test the existence of long run relationship between the series. The VECM Granger approach is implemented to detect the direction of causal relation between the variables.

Our results show that variables are cointegrated for long run relationship. The results indicate that natural gas consumption, exports, capital and labor are contributing factors to domestic production and hence economic growth in case of France. The causality analysis indicates that feedback hypothesis is validated between gas consumption and economic growth which implies that adoption of energy conservation policies should be discouraged. The bidirectional causality is also found between exports and economic growth, gas consumption and exports, capital and energy consumption, exports and capital. This study opens up new direction for policy makers to formulate a comprehensive energy policy to sustain economic growth for long span of time in case of France.

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