Energy Consumption and Regional Economic Growth: The Case of Iranian Manufacturing Sector

Cheratian, Iman and Goltabar, Saleh (2017): Energy Consumption and Regional Economic Growth: The Case of Iranian Manufacturing Sector.

Abstract

The relationship between energy consumption and economic growth has undergone extensive investigation and the empirical evidences are mixed ranging from bi- and uni-directional causality to no causality. These conflicts may be due to the fact that countries have different energy consumption patterns and various sources of energy. This paper is the first study on causal relationships between industrial energy consumption and real regional economic growth based on the panel data for 31 provinces in Iran over the period 2004–2014. We employ the GMM-SYS approach for the estimation of the panel vector autoregression (PVAR) model. Afterwards, by doing an in-depth analysis of energy consumption data, the purpose of this paper is to contribute to the debate by examining the causality in various forms of energy consumption (Diesel fuel, Natural Gas, Gasoline, Kerosene, LPG&LNG, Petroleum and Electricity). We discover: (a) totally, there is bidirectional causality between industrial energy consumption and regional growth; (b) regional growth leads to Gasoline consumption; (c) Natural gas consumption leads to regional growth; (d) there exists no causal relationship between regional growth and Diesel fuel, Kerosene, LPG&LNG and Petroleum consumption; (e) there is also bidirectional causality between industrial electricity consumption and regional economic growth. Taken together, the results of this study involve valuable information for policy makers at regional level.

• Item Type: MPRA Paper
• Language: English
• Keywords: Energy consumption, GDP PerCapita, Manufacturing sector, Causality, Panel VAR, Iran.
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General; N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries > N55 - Asia including Middle East; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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