The Causality between Energy Consumption and Economic Growth in China: Using Panel Method in a Multivariate Framework

The global energy issues have stimulated increasing research interest in the linkages between the energy consumption and economic growth. As the biggest developing country, China has surpassed United States to be the world's largest energy consumption country. This paper examines the casuality between GDP and energy consumption by using updated China provincial panel data for the period 1985-2007 within a multivariate framework by adopting Pedroni's panel methodology. The results show that cointegration is present between real GDP, energy consumption, the labor force, and real gross fixed capital. The results of Granger-causality test indicate the presence of Bi-directional causality between energy consumption and economic growth which supports the feed back hypothesis. Economic interpretations of the empirical results are also presented. (C) 2011 Published by Elsevier Ltd. Selection and peer-review under responsibility of RIUDS