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Energy consumption and real output: new evidence from the UAE
Author(s) -
Sweidan Osama D.
Publication year - 2012
Publication title -
opec energy review
Language(s) - English
Resource type - Journals
eISSN - 1753-0237
pISSN - 1753-0229
DOI - 10.1111/j.1753-0237.2012.00213.x
Subject(s) - cointegration , economics , granger causality , consumption (sociology) , energy consumption , short run , econometrics , error correction model , real gross domestic product , energy (signal processing) , causality (physics) , gross domestic product , macroeconomics , monetary economics , economy , statistics , engineering , mathematics , social science , physics , quantum mechanics , sociology , electrical engineering
The current paper seeks to examine the relationship between energy consumption and real output in the United Arab Emirates (UAE) economy. Technically, we assess the following two questions: ‘does the increase in energy consumption cause more economic growth in the UAE economy?’ or ‘does the rapid economic growth lead to more energy consumption?’ We utilise the bounds testing approach to cointegration and error correction model and Granger causality test to achieve the paper goal. The paper employs an annual data series of the UAE real gross domestic product and energy consumption over the 1973–2008 period. The findings of the paper have two levels: short‐run and long‐run. In the short‐run, the results reveal a clear statistically significant bidirectional positive relationship between energy consumption and real output in the UAE economy. However, in the long‐run the estimate illustrates only one relationship prevails from the short‐run. This one is the statistically significant positive unidirectional relationship running from real output to energy consumption.