Energy use, exports, imports and GDP: New evidence from the OECD countries

This paper aims to investigate the relationship between energy use-GDP, energy use-exports-trade and energy use-imports on aggregate level in the OECD countries. While the energy use-growth nexus is widely examined in the literature, studies on the energy use-trade nexus are very scarce. Thus, this study also serves to fill this gap by presenting a new research on the OECD countries. We employ the panel cointegration technique and use the Granger representation theorem to examine the presence of long-run relationship and the causality between pairs of variables. To investigate the presence of causality, several tests developed by Canning and Pedroni (2008) are used. We find that the pairs of energy use-GDP, energy use-exports and energy use-imports are cointegrated and there is two-way Granger causality between each pairs. We also estimate the long-run elasticities by employing panel dynamic ordinary least squares. The results suggest that the sign of long-run elasticity is positive for all pairs. Particularly, 1% increase in GDP, export and import causes almost 0.32%, 0.21% and 0.16% increase in energy use respectively.

► This paper investigates the relationship between energy use, GDP and trade in the 25 OECD countries.
► We employ panel cointegration technique and use the Granger representation theorem.
► To examine the presence of causality we use new tests developed by Canning and Pedroni (2008).
► We find that the pairs of energy use-GDP, energy use-export and energy use-import have cointegration relation.
► We also find that there is two-way Granger causality between each pairs.