An investigation of the energy consumption-growth nexus in the Arab countries -

Abstract

This paper studies the relationship between energy consumption and Gross Domestic Product (GDP) in a panel of 15 Arab countries. The time period of this study is from 1980 up to 2010 on an annual basis. Several Unit root tests were utilized to show that the two variables are non-stationary. The Johansen cointegration test shows that there exists a long run equilibrium relationship between energy consumption and GDP and There is a one directional causation from energy consumption to GDP. The Vector Error correction model (VECM) indicates evidence of a short run causation similar to that of the long run. This supports the growth hypothesis and implies that the implementation of any energy conservation policy will have effect on growth. In chapter 1, a general introduction will be provided that deals with historical and background information about energy and the Arab countries, with a general look at some of these countries. In addition to energy, the issue of growth will be presented as well. Chapter 2 will then discuss the different literature done on that topic with the different perspectives, models, and analysis provided. In Chapter 3, the methodology part will be presented. The main purpose of the methodology is to provide an in-depth look at the model and econometrics tools that may be utilized in analyzing the data collected. It will be about panel data models and will include several tests and procedures to check for unit roots and cointegration among other things. Chapter 4 will provide the analysis of the data we have collected using the tests and procedures described in the methodology part of chapter 3. The final chapter, Chapter 5, will be a conclusion of the work done and the results we reached in our study.