Relationship between Consumption of Energy Carriers and Value Added in the Iranian Economic Sectors: Granger Causality Test in Heterogeneous Mixed Panels

Document Type : Research Paper

Authors

1 P.H.D student in Economics, Lorestan University

2 Assistant Professor in Economics, Lorestan University

Abstract
This study investigates the causal linkages between consumption of energy carriers and value added in the Iranian economic sectors for the period 1974-2013 by using the granger causality test in heterogeneous mixed panels. For this, the panel causality testing approach, the method developed by Emirmahmutoglu and Kose (2011) based on the vector autoregressive (VAR) model and Wald tests with the country specific bootstrap critical values, is applied. This test, accounts cross dependency and heterogeneity among the members of the panel and also, co-integration between variables. Based on the results, the existence of a unidirectional causality relation of oil and gas to value added and the existence of a bidirectional causality relation between electricity and value added in the service sector and the entire sectors is confirmed. In agriculture sector, there is only a causal relation of electricity on value added. In industry sector, the existence of a bidirectional causality relation between gas and electricity with value added and the existence of a unidirectional causality relation of value added to oil is confirmed. In transportation sector, there is a causal relation of gas and electricity to value added and there is a bidirectional causality relation between the oil and the value added. The results can provide important policy recommendations in planning and explaining energy sector policies at the level sector in country.

Keywords


Volume 7, Issue 25 - Serial Number 4
Winter 2018
Pages 125-128

  • Receive Date 22 November 2017
  • Accept Date 11 September 2018
  • First Publish Date 11 September 2018
  • Publish Date 22 December 2017