The long-run causal relationship between electricity consumption and real GDP: Evidence from Japan and Germany

Abstract

We examine the long-run relationships between total electricity consumption (and two electricity types, i.e., combustible fuels electricity and nuclear energy) and real GDP for Japan and Germany, respectively, in a four-variable cointegration framework over 1996Q4–2015Q2. In each country’s case, we find a significant cointegrating relationship between total (and type) electricity consumption and real GDP. We then examine Granger causality between total (and type) electricity consumption and real GDP for each country. In Japan’s case, real GDP is dependent on electricity consumption over 1996Q4–2015Q2. In Germany’s case, electricity consumption follows fluctuations in real GDP. Both countries had an oversupply of nuclear energy in relation to real output over 1996Q4–2011Q1. The oversupply of nuclear energy in Germany has been eliminated following the recent nuclear phase-out. Japan, however, has a revived tendency to hang on to nuclear power.