Economic Growth And Electricity Consumption In 12 European Countries: A Causality Analysis Using Panel Data

The authors apply recent panel methodology to investigate the relationship between electricity consumption and real GDP for a set of 12 European Union countries using annual data for the period 1970-2004. Recently developed tests for panel unit roots, co-integration in heterogeneous panels and panel causality are employed. The results show a long-run relationship between the series. They estimate this relationship and test for causality. They find no short-run causality in any direction. These results might help to design appropriate electricity consumption policies in the sample countries, as well as investment policies in interconnections to build a single European market for electricity.