Natural gas consumption and economic growth: Panel evidence from OECD countries

This paper examines the relationship between natural gas energy consumption and economic growth in 26 Organisation for Economic Co-operation and Development (OECD) countries within a multivariate production model from 1991 to 2013. The study reveals that natural gas consumption, GDP growth, gross fixed capital formation, and trade openness are cointegrated with endogenous structural breaks. According to the panel fully modified ordinary least square (FMOLS) and the panel dynamic ordinary least square (DOLS), natural gas consumption in OECD countries positively affects GDP growth in the long-run. Furthermore, the VECM Granger causality test reveals unidirectional causality from natural gas consumption to GDP growth, which supports the growth hypothesis for the short-run. In the long-run, it is concluded that there is bidirectional causality between natural gas consumption and economic growth which confirms the feedback hypothesis.