The relationship between energy consumption and economic growth in Kazakhstan

Abstract

We investigate the causal relationship between energy use and economic growth for the Republic of Kazakhstan during 1990–2008. The modelling strategy used in this study includes testing for Granger causality using the vector error correction model, augmented Dickey–Fuller and Phillips–Perron unit root tests and the co-integration test. The empirical results show the existence of unidirectional causalities running from energy consumption (EC) to economic growth and from economic growth to energy causality in the long and short terms, respectively. The research results do not advocate the neoclassical standpoint that EC does not have any effect on economic growth in terms of long run. In terms of policy implications, they imply that energy conservation policies can stunt economic growth. Consequently, the government should support the growth of energy production in the country for the sake of economic growth. However, in the short term, the result is quite the opposite: causality runs from gross domestic product to EC, thus implying the need for energy conservation policies from a short-term perspective.