Energy consumption and economic growth nexus in South Africa: Asymmetric frequency domain approach

ABSTRACT

In this article, we analyze symmetric and asymmetric causal relationships between energy consumption and economic growth in time and frequency domains, using annual data covering the period of 1965–2012. In general, our results tend to suggest that energy consumption causes growth, especially the negative component of energy consumption. However, when accounting for structural breaks, results are mixed, with some evidence of growth leading to energy consumption as well. Overall, using asymmetric causality in both time and frequency domains, we tend to show that a reduction in energy consumption is likely to reduce growth; however, there is no guarantee that increases in energy consumption will boost economic growth.

KEYWORDS:

• Asymmetry
• energy
• granger causality
• growth
• South Africa
• time and frequency domains

Acknowledgments

We would like to thank an anonymous referee for many helpful comments. However, any remaining errors are solely ours.

Notes

¹ Where p is the lag order.

² We used both the Phillips and Perron (1988) and the augmented Dickey and Fuller (1979) tests.

³ Using Doornik–Hansen Omnibus multivariate (univariate) normality test.

⁴ Using multivariate ARCH test developed by Hacker and Hatemi-J (2005).