International Review of Environmental and Resource Economics > Vol 14 > Issue 4

The Causal Relationship between Primary Energy Consumption and Economic Growth in Israel: A Multivariate Approach

Cosimo Magazzino, Roma Tre University, Italy, , Nicolas Schneider, Paris 1 Panthéon-Sorbonne University, France,
Suggested Citation
Cosimo Magazzino and Nicolas Schneider (2020), "The Causal Relationship between Primary Energy Consumption and Economic Growth in Israel: A Multivariate Approach", International Review of Environmental and Resource Economics: Vol. 14: No. 4, pp 417-491.

Publication Date: 15 Dec 2020
© 2020 C. Magazzino and N. Schneider
Econometric models,  Nonstationary time series,  Time series analysis,  Environmental Economics
JEL Codes: C32F10Q43
Energy consumptionGDPemploymentcapital stockIsraeltime-series


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In this article:
1. Introduction 
2. Literature Review 
3. An Illustrative Case: Israel 
4. Methodology and Data 
5. Empirical Results 
6. Discussion 
7. Conclusions and Policy Recommendations 


The empirical relationship among energy and economic growth has been abundantly studied in the literature. In this paper, we provide a state-of-the-art review of the topic, and highlight the main methodological issues that previous studies have attempted to address so far. Since Israel is experiencing profound energy changes, we take this case as an illustration and investigate the causal link between primary energy consumption and economic growth. Capital and labour are included in the model with multivariate framework. A cointegrating relationship is found among the variables. Causality tests' results display both short-run and long-run relationship between economic growth and primary energy consumption. Besides, a unidirectional causality running from economic growth to primary energy consumption is supported. Since the primary energy consumed in Israel is overwhelmingly oil, natural gas and coal, we support the economic growth-led-primary energy consumption hypothesis. In line with previous studies, our findings suggest that promoting low-carbon energy sources through fossil conservation policies may not significantly hinder economic growth.