A bootstrap panel Granger causality analysis of energy consumption and economic growth in the G7 countries

Abstract

The paper investigates the causality between energy consumption and economic growth in the countries which are members of the Group of Seven (G7), during the period 1970–2012, by following the bootstrap panel Granger causality approach. The main aim of the paper is to identify the right policies to deal with the interaction between energy consumption and economic growth.The findings show a bi-directional causality between energy consumption and GDP in Canada, Japan and United States. GDP causes energy consumption in France and Germany, while no causality is found for the rest of the sample (i.e. Italy and United Kingdom). These outcomes are very sensitive to the cross-sectional dependences between countries. Therefore, their environmental and growth policies should be widely reconsidered when the level of interdependence dramatically decreases.