Linear and nonlinear causal relationship between energy consumption and economic growth in China: New evidence based on wavelet analysis

The energy-growth nexus has important policy implications for economic development. The results from many past studies that investigated the causality direction of this nexus can lead to misleading policy guidance. Using data on China from 1953 to 2013, this study shows that an application of causal...

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Bibliographic Details
Published in:PloS one 2018-05, Vol.13 (5), p.e0197785-e0197785
Main Authors: Ha, Junsheng, Tan, Pei-Pei, Goh, Kim-Leng
Format: Article
Language:English
Subjects:
Algorithms
Alternative energy sources
Causality
China
Data processing
Ecology and Environmental Sciences
Economic analysis
Economic aspects
Economic Development
Economic growth
Economic research
Electricity
Energy conservation
Energy consumption
Energy economics
Energy policy
Energy-Generating Resources
Engineering and Technology
Environmental aspects
Hypotheses
Management
People and Places
Physical Sciences
Renewable resources
Research and Analysis Methods
Social Sciences
Studies
Tan, Kim
Time series
Wavelet Analysis
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Summary:The energy-growth nexus has important policy implications for economic development. The results from many past studies that investigated the causality direction of this nexus can lead to misleading policy guidance. Using data on China from 1953 to 2013, this study shows that an application of causality test on the time series of energy consumption and national output has masked a lot of information. The Toda-Yamamoto test with bootstrapped critical values and the newly proposed non-linear causality test reveal no causal relationship. However, a further application of these tests using series in different time-frequency domain obtained from wavelet decomposition indicates that while energy consumption Granger causes economic growth in the short run, the reverse is true in the medium term. A bidirectional causal relationship is found for the long run. This approach has proven to be superior in unveiling information on the energy-growth nexus that are useful for policy planning over different time horizons.
ISSN:1932-6203
1932-6203
DOI:10.1371/journal.pone.0197785