The asymmetric Granger-causality analysis between energy consumption and income in the United States

We investigated Granger-causality between variants of the energy consumption sources and Gross Domestic Product (GDP) for the United State of America (USA). To accomplish this objective we utilized a recent approach of asymmetric Granger-causality developed by Hatemi-J for the period January 1973–October 2011. Our results indicated presence of asymmetric Granger-causality between a few variants of energy consumption sources (i.e., Coal Consumption (CC), Natural Gas Consumption (NG), Primary Energy Consumption (PE), and Total Renewable Energy Consumption (TRE)) and GDP (all measured in growth rates). Additionally, when positive shocks are analyzed we found the evidence of unidirectional Granger-causality running from GDP growth rate to growth rate of CC and from growth rate of Total Electricity End Use (EC) to GDP growth rate. Additionally, we find significant evidence of bidirectional Granger-causality between NG and GDP, PE and GDP and TRE and GDP (all measured in growth rates). However, in case of negative shocks we find that the null hypothesis that growth rates in CC and TRE do not Granger-cause GDP growth rate is rejected at 5% level of significance. These results have important implications for research analysts as well as policy makers of the USA economy.