ENERGY CONSUMPTION AND ECONOMIC GROWTH IN CENTRAL AND EASTERN EUROPEAN COUNTRIES: A PANEL DATA ANALYSIS

The paper examines causal relationship between energy consumption and economic growth using Pedroni's panel cointegration test based on the annual panel data for Central and Eastern European countries over the period 1995-2010. Towards the end of the 20th century, the political and economic systems of those countries began the process of transformations, as a result of which all of them experienced a leap forward and accelerated economic growth. This allowed us to examine both short-and long-term causality between energy consumption and economic growth. Taking into consideration rapid economic changes experienced by the countries analysed, a set of variables was extended to include real gross fixed capital formation and labour force. The results obtained indicate that the variables remain in long-term equilibrium. Short-term relationship between energy consumption and GDP is bidirectional. Moreover, real gross fixed capital formation and labour force cause GDP growth.