Assessing the spillovers of energy prices & growth: evidence from EU
Σούρσου, Συμεώνη - Ελένη
KeywordsEconomic growth ; Electricity prices ; European Union ; Cointegration ; Causality ; Long-run equilibrium
The aim of this thesis is to examine the long-run relationship among the energy prices and the economic growth within the EU framework using time series analysis. On the basis of cointegration and Error-Correction Mechanisms the prickly issue of causality among the real GDP and the energy prices is assessed. Furthermore, the model includes as explanatory variables the energy consumption and the intensity. Analytically, the study develops the Engle-Granger 2-step procedure as well as the Johansen’s methodology for the purpose of a Vector-Error Correction Model. Delving into the causal effects Wald tests and Impulse-Response Functions are employed. Finally, the thesis proceeds to a Cholesky Forecast-Variance Decomposition Analysis for the sake of estimating the impact of energy prices, of energy consumption and that one of intensity on the real GDP. Evidence on conservation hypothesis is observed on the case of real European GDP and residential electricity prices, whereas growth hypothesis is entailed with respect to industrial electricity prices and real output. In fact, household electricity sector exhibits the highest level of influence; industrial electricity price and crude oil price can also ″Granger cause″ residential electricity prices in the EU. Signs of feedback hypothesis concern the final energy consumption and the residential electricity price. Though their significance at 10% level poses limits over the findings’ accuracy. Finally, the European GDP is strongly endogenous in the short-run whereas shocks from the other aggregates are permanent and expand their leverage over the course of time.