Cointegration Analysis of Economic Growth and Energy Consumption in China Using a Multivariate Framework Based on Neo-Classical Production
基于生产函数的中国能源消费与经济增长的多变量协整关系的分析

The study of the relationship between energy consumption and economic growth has been a hot topic in recent decades. Many studies have attempted to investigate the causal relationship between consumption and growth using the Granger causality method for China; however, these studies have not reached a consensus on the role of energy consumption in economic growth. A methodological development in this field has been the use of a multivariate framework and the application of vector error correction models (VECM) rather than vector autoregressive (VAR) testing. The VAR model may suggest a short run relationship between variables because the long run information is removed in the first differencing, and a VECM avoids such shortcomings. The purpose of this paper is to re-investigate the causal relationship between energy consumption and economic growth for China from 1978-2008 using a multivariate framework based on neo-classical production function where economic output, energy consumption, capital stock and labor level are treated as variables. To examine the existence of cointegration and Granger causality in the long and short run among variables, we employ a VECM and the Johansen-Juselius cointegration test method. Our results show that economic growth, energy consumption, capital and employment show a cointegration relationship so we established a VECM on these and tested the existence and direction of causality. The results suggest no Granger causality between energy consumption and economic growth in the short run, but a unidirectional causality running from economic growth to energy consumption in the long run. An important policy implication resulting from this analysis is that the Chinese government can achieve energy conservation and carbon emission reduction without a negative effect on economic growth in the long run. We discuss these results and make some suggestions from the perspective of China's economic and sustainable development.