Energy consumption and economic growth: Parametric and non-parametric causality testing for the case of Greece

The objective of this paper is to contribute towards the understanding of the linear and non-linear causal linkages between energy consumption and economic activity, making use of annual time series data of Greece for the period 1960-2008. Two are the salient features of our study: first, the total energy consumption has been adjusted for qualitative differences among its constituent components through the thermodynamics of energy conversion. In doing so, we rule out the possibility of a misleading inference with respect to causality due to aggregation bias. Second, the investigation of the causal linkage between economic growth and the adjusted for quality total energy consumption is conducted within a non-linear context. Our empirical results reveal significant unidirectional both linear and non-linear causal linkages running from total useful energy to economic growth. These findings may provide valuable information for the contemplation of more effective energy policies with respect to both the consumption of energy and environmental protection.

► The energy consumption and economic growth nexus is investigated for Greece. ► A quality-adjusted energy series is used in our analysis. ► The causality testing procedure is conducted within a non-linear context. ► A causality running from energy consumption to economic growth is verified.