Energy Cost, Energy Risk and Japanese Technical Changes

This study assumes the existence of a short-run energy cost-driven technical application mechanism and a long-run energy risk-driven technical progress mechanism. Using the Japanese monthly data from 1988 to 2010, we perform Granger causality tests on the four time series, namely energy price, import volume of crude oil, geographical dispersion of oil imports, as well as real industrial output. The results show that for a country with tight energy constraint, energy price shocks may trigger the both mechanisms of technical application and technical progress, which facilitate the short-run and the long-run economic growth separately. Moreover, we find that the geographical dispersion of oil imports is mainly employed as a tool to control the risk of import volume, instead of energy price uncertainties.