Energy consumption and economic growth nexus in Portugal, Italy, Greece, Spain and Turkey: An ARDL bounds test approach (1965-2009)

The paper examines the nexus between primary energy consumption and growth in Portugal, Italy, Greece, Spain and Turkey (PIGST), with annual time series data, from 1965 to 2009. PIGST are southern European economies which have experienced several episodes that make them of particular interest to the study of periods of economic expansion and stagnation. An ARDL bounds test approach is a suitable technique to examine energy-growth nexus, within the context of countries with both sporadic shocks (outliers) and permanent shocks (structural breaks). Empirical results suggest bidirectional causality between energy and growth in both the long-run and short-run, supporting the feedback hypothesis. The results reveal themselves to be robust to panel framework. An energy conservation policy will reduce GDP growth, while a saving phenomenon is observed, since one additional unit of product requires less than one unit of energy.

► We examine the energy-growth nexus in Portugal, Italy, Greece, Spain and Turkey, by an ARDL bounds test approach. ► The ARDL reveals to be a suitable tool within the context of countries with both sporadic and permanent shocks. ► The results assure the presence of bidirectional causality supporting the feedback hypothesis. ► The elasticities suggest that policy measures that constrain energy consumption slow down economic growth for PIGST. ► A saving phenomenon is observed, since one additional unit of product requires less than one unit of energy.