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The Causality between Energy Consumption and Economic Growth for China in a Time-varying Framework

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Extending existing studies based on constant structure, we adopt a time-varying approach to study energy consumption and GDP causality for China in a context of industrialization and urbanization. We find that in light of structural change, China's energy consumption is trend-stationary and thus forms no cointegration with GDP. Further, the relationship between energy consumption and GDP is two-way causal and has been decreasing in strength over time. Finally, industrialization and urbanization, especially the former, have limited effects on energy consumption, suggesting the decreasing energy intensities in individual sectors, instead of structure shift between sectors, as the main reason for China's decreasing energy intensity over the years.

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JEL Codes: Q41: Energy: Demand and Supply; Prices, Q40: Energy: General, R12: Size and Spatial Distributions of Regional Economic Activity

Keywords: Energy consumption, Economic growth, China

DOI: 10.5547/01956574.37.SI1.jzha

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Published in Volume 37, China Special Issue of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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