Causality Between Energy Consumption and Economic Growth in India: An Application of Cointegration and Error-Correction Modeling

Applying the Johansen cointegration test, this study finds that energy consumption, economic growth, capital and labour are cointegrated. However, this study detects no causality from energy consumption to economic growth using Hsiao's version of the Granger causality method with the aid of cointegration and error correction modelling. Interestingly, it is discerned that causality runs from economic growth to energy consumption both in the short run and in the long run and causality flows from capital to economic growth in the short run.