Causality between Energy Consumption and GDP: Evidence from 30 OECD and 78 Non-OECD Countries

Energy arguably plays a vital role in economic development. Hence many studies have attempted to test for causality between energy and economic growth; however, no consensus has emerged. This paper, therefore, tests for causality between energy and GDP using a consistent data set and methodology for 30 OECD and 78 non-OECD countries. Causality from aggregate energy consumption to GDP and GDP to energy consumption is found to be more prevalent in the developed OECD countries compared to the developing non-OECD countries; implying that a policy to reduce energy consumption aimed at reducing emissions is likely to have greater impact on the GDP of the developed rather than the developing world.