Abstract
We employ the maximum entropy bootstrap (MEB) framework to provide convincing evidence on the energy consumption (EC) and gross domestic product (GDP) nexus between 1975 and 2010 in the Philippines. We also perform a cointegration analysis and Granger causality test of the data to illustrate the advantages of MEB approach. This paper shows more accurate inference in comparison to conventional hypothesis tests based on asymptotic theory. Without employing MEB, the result of causality is very sensitive to a very small sample size and time period chosen that made the results inconsistent. Therefore, MEB framework is robust to time period chosen and even in a very small sample size. The analysis shows no evidence of a causal relationship between EC and GDP in the Philippines. The findings emphasise the fact that the Philippines is a less developed country and predominantly agrarian-based; thus, energy dependent.
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