The causal relationship between natural gas consumption and economic growth: evidence from the G7 countries

Abstract

This article re-examines the nature of the causality between natural gas consumption and economic growth in G7 countries over the period from 1965 to 2011. We employ the Granger causality procedure proposed by Emirmahmutoglu and Kose (2011) which takes into account cross-sectional dependency and heterogeneity across countries. Our overall empirical results support the neutrality hypothesis for the panel while the individual country results confirm the same result with the exception of the case of UK, where the conservation hypothesis is confirmed, showing that GDP causes natural gas consumption in the country. These results make policies that promote the consumption of natural gas risk-free with regard to their effects to the economic growth and development levels.

Keywords:

• Energy
• natural gas
• economic growth
• panel Granger causality

JEL Classification:

• Q31
• Q32

Notes

¹ The codes are available for download from: http://www.runmycode.org/companion/view/89.