Energy consumption and economic growth: The case of transition economies

ABSTRACT

This study investigates the causality relationship between energy consumption and economic growth in 17 transition countries, which are Albania, Armenia, Belarus, Bulgaria, Czech Republic, Estonia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Moldova, Poland, Romania, Russian Federation, Slovenia, Ukraine, and Georgia. Empirical findings indicate that there is unidirectional causality from economic growth to energy consumption in the long run. The results support for conservation hypothesis suggests that energy conservation policies have no effect on economic growth. They can simultaneously achieve policy goals concerning growth and energy.

KEYWORDS:

• Causality
• cointegration
• energy consumption
• growth
• unit root

Notes

¹The first study on this subject was conducted by Kraft and Kraft (1978), who examined the relationship between the two variables in the US in the period 1947–1974, and found causality from economic growth to energy consumption. However, findings of later studies showed that no such relationship of causality existed.