Revisiting coal consumption and output nexus in China and India: A frequency domain approach

ABSTRACT

Dependency on coal consumption to maintain energy security is common to the majority of developing countries where the coal is found in abundance. China and India are the leaders in coal consumption from the developing countries group, so establishing a relationship between the coal consumption and the economic growth for these two will derive useful lessons for policy-makers. This paper re-examines the causal relationship between coal consumption and economic growth in China and India for the period 1969–2013, for the first time using a frequency domain–based Granger causality test proposed by Brietung and Candelon (2006). The empirical results support unidirectional causality running from coal consumption to economic growth for both China and India. The findings of this paper provide important policy implications for energy policies and strategies for these two countries under study.

KEYWORDS:

• China and India
• coal consumption
• frequency domain
• Granger causality test
• output

JEL:

• C23
• Q43

Notes

¹ Of course, this model can also be extended to higher-dimensional systems. For details see Hosoya (2001) and Brietung and Candelon (2006).

² To save space, results about unit root and cointegration tests are not reported here but available upon request.

³ According to Brietung and Candelon (2006), this approach can also be used to establish standard inference for the frequency domain GC test.