Natural Gas Consumption and Economic Growth in Korea: A Causality Analysis

Abstract

This article investigates the short- and long-run causality issues between natural gas consumption and economic growth in Korea by applying time-series techniques. It employs quarterly data covering the period 1991–2008. Tests for unit roots, co-integration, and Granger-causality based on the multivariate vector error-correction models are presented. The results show that there is bidirectional causality between natural gas consumption and economic growth in Korea. This means that an increase in natural gas consumption directly affects economic growth and that economic growth also stimulates further natural gas consumption.

Keywords:

• causality
• economic growth
• Korea
• natural gas consumption
• vector error-correction model

Notes

* represents the rejection of the null hypothesis at 1% level of significance.

* indicates the rejection of the null hypothesis at 1% level of significance.

*, ** and *** denote the rejection of the null hypothesis at 10%, 5% and 1% levels of significance, respectively.