Energy-growth long-term relationship under structural breaks. Evidence from Canada, 17 Latin American economies and the USA*

- We study the energy-growth long-term relationship in 19 countries.
- We discuss the merits and problems of Granger causality to infer causal links.
- We focus on super exogeneity rather than Granger causality to infer causal links.
- We control for structural breaks in the cointegrated ECP-GDP relationship.
- Evidence supports the growth hypothesis and the conservation hypothesis.

We study the relationship and the causal link between Electric Power Consumption, EPC, and Gross Domestic Product, GDP (both per capita) for 17 countries in Latin America, Canada and the USA. Considering that many of these economies underwent important economic crises in the last three decades, we therefore model the EPC-GDP relationship through a VEC specification that allows for structural breaks, along with a robust testing methodology of causal links based on the concepts of weak and super exogeneity, rather than Granger causality. Evidence favorable to the growth hypothesis (EPC→GDP) is found for eight countries, while data of three countries support the conservation hypothesis (GDP→EPC). For three countries evidence is favorable to the neutrality hypothesis, but should be considered with caution. As for the remaining five countries the evidence is not conclusive.