Revisiting the energy consumption–economic growth causal relationships in tails

Abstract

PurposeThe purpose of this paper is to investigate the relationship between the energy consumption and the economic growth in the USA and in a sectoral level by using monthly data from January 1991 to May 2016.Design/methodology/approachWhile assessing the relationship at a country level, the authors also examine five sectors by using quantile causality.FindingsThe findings indicate the existence of a causality at the sectoral level in tails. More specifically, industrial and electric sectors cause the growth at the lower and higher levels. Residential, commercial and transportation sectors do not cause the growth in all levels. Total consumption causes the growth in the middle and low levels but not in the high level. Finally, the empirical evidence signifies an asymmetric relationship between the covariates.Practical implicationsThe results imply that when the consumption deals conditions with fluctuation, it is likely to be affected by growth. In such a case, energy policies gear toward reducing or increasing energy intensity, improving energy efficiency, encouraging the use of alternative sources and investing in the development of technology.Originality/valueThe authors use, for the first time, the quantile causality for the case of energy consumption and economic growth. The quantile test is useful for a thorough comprehension of the causal relationship for this area. Compared to the OLS, which is used for the majority of causality tests, the quantile investigates the causality at the sectoral level in the tails.