Causal Relationships between Energy Consumption and Economic Growth

The relationship between energy consumption and economic growth has long been the focus at home and abroad. The general view is: energy consumption promotes economic growth; economic growth affects energy consumption on the other hand. In sight of the original theory, this paper adopts the statistical data of Shandong Province from 1980 to 2008, which include Gross Domestic Products (GDP), energy consumption, fixed asset investment and employees. Using unit root, co-integration and Granger causality test, we examined the relationship between energy consumption and economic growth in Shandong Province. The results show that energy consumption and economic growth have long-term trend relation, and there is two-way causality between them. The econometric model is estimated using Generalized Least Square (GLS) method. The conclusions are as follows: energy consumption and economic growth is positively correlated in Shandong province, and economic growth has highly depended on energy consumption.