The Relationship Between Electricity Consumption, Real GDP And Employment In G-7 Countries: Seasonal Panel Unit Roots And Cointegration Model

Abstract

The energy sector unarguably play a crucial role economic growth and employment in developed countries. The changes in energy use, particulary electricity consumption, are often correlated with changes in macro economic variable such as economic development, labor market, investment.  This paper aims to reveal the relationship between electricity consumption and macroeconomic variables by using new techiques for seasonal unit root test for panel data. At first, we have applied the HEGY-IPS test which is the presence of seasonal panel unit root test. Secondly, we have investigated the relationship between electricity consumption, income and employment in G-7 countries using seasonal cointegration analysis which is called EGHL-type test over the period of 1995:q1 to 2013:q3.

The results of this study show that all variables have unit root at zero frequency and electricity consumption and employment series have seasonal unit roots at semi-annual and annual frequencies for each countries. Besides that, there exists seasonal panel unit roots in electricity consumption and employment series excepted income series. These results indicate that the series are possibly cointegrated. For G-7 countries, there isn’t any cointegration relationship detected among the electricity consumption, real GDP and employment series at the zero, semi annual and annual frequencies excepted for Italy.

Key words: Electricity Consumption, Economic Growth, Employment, Seasonal Panel Unit Roots, Seasonal Cointegration, G-7 Countries