The Relationship between Energy Production and GDP: Evidence from Selected European Economies

Grażyna Szustak,Łukasz Szewczyk,Piotr Dąbrowski,Witold Gradoń

doi:10.3390/en15010050

Abstract

The aim of this article was to investigate the possible relationship between energy production and GDP growth. This problem is of a crucial importance because as a numerous studies show, it is difficult to give an unambiguous answer to the question of whether there is a relationship between GDP and energy production and what direction it takes if it exists, i.e., whether energy production drives GDP growth or GDP growth drives energy production. The research conducted by the authors used data on hourly power production in MWh/h averaged over a whole day, which were converted into total quarterly production. The data were divided in terms of the type of energy into conventional, renewable, other and total. Next, the correlation coefficient was calculated for proper data sets in order to determine whether there was a correlation between the variables. The main conclusion from the study is the fact that a correlation measured with the Pearson correlation coefficient is not reflected in the data. Changes in power production independent of the source of power do not influence the GDP directly. Naturally, in some countries, the connection between power production and GDP was stronger; however, comparing this to the rest of the researched countries, where correlation was low or even extremely low, it can be seen that the relationship is random. This study should be seen as an introductory one with a perspective of broadening research in terms of causality between variables, which, nowadays, has great application in terms of climate change and sustainable development.

Highlights

Economic growth is the overriding goal of any country’s economic policy
It is worth remembering that the concept of “economic growth” is not the same as “economic development”, which includes qualitative changes accompanying economic growth, improving the competitiveness of a given economy [1]
In Pakistan, the results showed that growth in GDP caused an increase in energy consumption [17]

Summary

Introduction

The measure of economic growth—GDP—reflects the increase in the value of manufactured goods and services in a given country in a specific period (value of goods and services produced minus the value of goods and services used in production) [1,2]. GDP is commonly seen as an indicator of economic activity. GDP inaccurately or in a biased manner, e.g., by not taking into account the profits of multinational companies, the development of the digital economy and the activities of the “black market” or the price deflators separating nominal and real GDP may use a biased measure of inflation. The rate of economic growth is nothing more than the increase/decrease in real GDP in a given year compared to the previous/base year [4]

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Methods

Conclusion