The relationship between energy consumption and economıc growth in the G7 countries: the time-varying asymmetric causality analysis

Abstract

PurposeThis study aims to reveal new information about the relationship between energy consumption and economic growth for the time-varying causality.Design/methodology/approachEconomic growth and renewable and nonrenewable energy consumption data of the G7 countries (Canada, France, Germany, Italy, Japan, the UK and the USA) for the 1980–2016 period were used in the study. The nonasymmetric causality test developed by Hacker and Hatemi-J (2006) and both traditional and time-varying forms of the asymmetric causality test by Hatemi-J (2012) were used as the study method.FindingsWhile the study favors feedback hypothesis for renewable energy consumption in the nonasymmetric causality tests in the UK economy, it favors the same hypothesis for nonrenewable energy consumption in the US economy. However, according to the results reported by Hatemi-J (2012), the feedback hypothesis, which is supported for the UK, is supported only in positive shocks, yet not for each period of analysis. Similarly, feedback hypothesis, which is supported in the USA, is supported only in the negative shocks, yet not for each period of analysis.Originality/valueThis study examined that the asymmetric causality relationship between variables can be analyzed in time-varying form. Therefore, whether positive and negative shocks in renewable and nonrenewable energy consumption always provide useful information in estimations about economic growth is analyzed.