Energy Consumption – Gross Domestic Product Causal Relationship in the Italian Regions

Abstract

Despite of increasing amount of literature available on the relationship between energy consumption and Gross Domestic Product on a multi-countries framework, empirical analysis about this relationship in a spatial disaggregate level remains scarce. In this paper we investigate the relationship between energy consumption and real income by means of panel dataset of Italian regions using annual data covering the period 1980–2007. The panel co-integration and panel vector error correction models are employed to infer the dynamic directions of the causality between the two variables. Based on the panel co-integration test by Westerlund (Oxf Bull Econ Stat 69:709–748, 2007) we individuate a long-run equilibrium relationship between Gross Domestic Product (GDP) and Electricity Consumption (CE). Furthermore, the results of a panel Vector Error Correction Model suggest the presence of a bi-directional causality between variables both in the long-run and in short-run.KeywordsGross Domestic ProductElectricity ConsumptionItalian RegionReal Gross Domestic ProductError Correction TermThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.