Dynamic relationship between energy consumption and income in Tunisia: A SVECM approach

Boufateh, Talel and Ajmi, Ahdi Noomen and El Montasser, Ghassen and Issaoui, Fakhri (2013): Dynamic relationship between energy consumption and income in Tunisia: A SVECM approach.

Abstract

This study examines the short-run and long-run dynamics binding energy consumption to GDP using a structural vector error correction (SVECM) model during the period 1971-2009. In addition, a comparative study between Tunisia,the USA and Sweden is conducted. Results spread over two axes. First,the cyclical component of the model indicates that the instantaneous impact of a short run shock on energy is generally positive. However, the impact of this shock on output is positive in the USA and Sweden and negative in Tunisia. Therefore, it seems that unlike a small country like Tunisia where the productive system is directly penalized, developed countries are better able to cope with a transitory shock and find alternatives to productivity gains. Secondly concerning the trend component of the model, we conclude that the effect of a long run shock on energy consumption is positive in Tunisia while it is negative in the USA and Sweden. The effect of a long run shock on production for both the developed countries is positive and increasing. This findings seems interesting insofar as it reflects the willingness of developed countries substitute current energy sources by renewable and cleaner sources. It also reflects Tunisian dependence to current sources of electricity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Energy consumption, GDP, SVEC model, Tunisia
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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