A Dynamic Causality Study between Electricity Consumption and Economic Growth for Global Panel: Literature Review

In the last three decades, the causal relationships between energy consumption and economic growth as well as economic growth and carbon dioxide emissions are investigated widely in economic literature. The enormous amount of empirical literatures to examine the causal relationship between energy consumption and economic growth fall into four categories; (i) no causal relationship between energy consumption and economic growth, (ii) unidirectional causality from energy consumption to economic growth, (iii) unidirectional causality from economic growth to energy consumption and (iii) bidirectional causality between energy consumption and economic growth.
A number of studies that found no causal relationship between energy consumption and economic growth are as; Akarca and Long, Yu and Hwang, Yu and Choi, Erol and Yu, Yu and Jin, Stern, Cheng, Imran, Hossain, Hossain and Saeki. there

Studies that found unidirectional causality from economic growth to energy consumption are as; Cheng and Lai, Glasure and Lee, Cheng, Chang and Wong, Soytas and Sari, Narayan and Smyth, Hossain, and Hossain and Saeki. A number of studies that have found the unidirectional causality from energy consumption to economic growth are as; Yu and Choi, Masih and Masih, Asafu and Adjaye, Yang, Soytas and Sari, Morimoto and Hope, Shina and Lam, Altinary and Karagol, Narayan and Singh, Squalli, Hossain and Hossain and Saeki. The studies that have found two way causation are as; Masih and Masih, Asafu and Adjaye, Glasure, Oh and Lee.

In time series econometrics most recent studies have tended to focus on VAR and VEC models and cointegration approach. For example Asafu and Adjaye investigated the causal relationship between energy use and income in four Asian countries using cointegration and error correction mechanism. They found that causality runs from energy use to income in India and Indonesia and bi-directional causality in Thailand and Philippines. Yang, found bi-directional causality between energy consumption and GDP in Taiwan and this results contradicts with Cheng and Lai results. Soytas and Sari found bidirectional causality in Argentina and unidirectional causality from GDP to energy consumption in Italy and South Korea, and from energy consumption to GDP in Turkey, France, Germany and Japan. Paul and Bhattacharya found bidirectional causality between energy consumption and economic growth in India. Using cointegration analysis Wietze and and Van found that unidirectional causality from GDP to energy consumption in Turkey. Dirck used the cointegartion approach to study the causal relationship between electricity consumption and economic growth for the panel of 15 European countries. He found the unidirectional causality from electricity consumption to economic growth for Greece, Italy, and Belgium, and from economic growth to electricity consumption for Great Britain, Ireland, Netherland, Spain and Portugal, no causality is found in Austria, Germany, Denmark, Finland, France, Luxembourg, and Switzerland. Narayan, Narayan and Popp used the cointegartion approach to study the causal relationship between electricity consumption and economic growth for six different panels of 93 countries. They found bidirectional causality relationship between these two variables except for the panel of Middle East. Unidirectional causality from GDP to electricity consumption is found for the panel of Middle East. Hossain used the cointegration approach and VEC model to investigate the causal relationship between economic growth and energy consumption for a panel of 9 newly industrialized countries and found unidirectional causality from economic growth to energy consumption for this panel.