Energy consumption–GDP causality in MENA countries

ABSTRACT

This study explores the causal relationship between energy consumption and real GDP for 11 Middle East and North African Countries within the bivariate Vector Autoregression model and Granger causality approach, later developed by Toda and Yamamoto (1995), over the period 1971–2011. The results from causality tests reveal (1) unidirectional causality running from energy consumption to real GDP in Egypt, Iran, Lebanon, and Tunisia; (2) unidirectional causality running from real GDP to energy consumption in Algeria, Morocco, and Saudi Arabia; (3) bidirectional causality in Oman and United Arab Emirates; and (4) no causality between energy consumption and real GDP in Bahrain and Malta. The importance of these findings lies on their policy suggestions. These findings indicate that energy conservation policies can be implemented in Algeria, Bahrain, Malta, Morocco, and Saudi Arabia.

KEYWORDS:

• Economic growth
• energy consumption
• Granger causality
• Toda–Yamamoto method