Linear and nonlinear causal relationship between energy consumption and economic growth in China: New evidence based on wavelet analysis

Ha, Junsheng and Tan, Pei Pei and Goh, Kim Leng (2018) Linear and nonlinear causal relationship between energy consumption and economic growth in China: New evidence based on wavelet analysis. PLoS ONE, 13 (5). e0197785. ISSN 1932-6203

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Official URL: https://doi.org/10.1371/journal.pone.0197785

Abstract

The energy-growth nexus has important policy implications for economic development. The results from many past studies that investigated the causality direction of this nexus can lead to misleading policy guidance. Using data on China from 1953 to 2013, this study shows that an application of causality test on the time series of energy consumption and national output has masked a lot of information. The Toda-Yamamoto test with bootstrapped critical values and the newly proposed non-linear causality test reveal no causal relationship. However, a further application of these tests using series in different time-frequency domain obtained from wavelet decomposition indicates that while energy consumption Granger causes economic growth in the short run, the reverse is true in the medium term. A bidirectional causal relationship is found for the long run. This approach has proven to be superior in unveiling information on the energy-growth nexus that are useful for policy planning over different time horizons.

Item Type: Article
Uncontrolled Keywords: Algorithms; China; Economic Development; Energy-Generating Resources; Wavelet Analysis
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HC Economic History and Conditions
Divisions: Faculty of Economics & Administration
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 20 Aug 2019 07:37
Last Modified: 20 Aug 2019 07:37
URI: http://eprints.um.edu.my/id/eprint/21990

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