Causal linkages between energy investment and economic growth: a panel data modelling analysis of China

ABSTRACT

The current study is an empirical investigation of causal linkages between energy investment and economic growth in China. It employs the “second generation” common correlated effects mean group (CCEMG) estimator, to overcome cross-sectional dependence issue, for 31 Chinese provinces and cities covering time span 2001–2016. This study extends its contribution by augmenting the economic growth model for energy investment, developing theoretical channels of relationship between energy investment and economic growth, and finally establishing causal linkages between energy investment and economic growth. The empirical findings confirm positive and bilateral causal linkages between energy investment and economic growth. Moreover, the impact of economic growth on energy investment growth is more powerful than that on the other way around. It suggests that energy investment policies are expected to spur economic growth in China and vice versa.

KEYWORDS:

• Causal linkages
• China
• cross-sectional dependence
• economic growth
• energy investment
• second generation CCEMG

Notes

¹ This finding is consistent with that of Samouilidis and Mitropoulos (1983).