November 05 2012
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Dr. Amarendra Sharma, Assistant Professor of Economics, and EC student Cassondra Bruce ’14, have co-authored a paper that will be published as the feature article in volume 38 of the Journal of Energy and Development.
The paper is entitled The Relationship between Energy and US GDP: A Multivariate Vector Error Correction Model, and examines the relationship between energy consumption and real GDP in the United States. The main focus of the paper was to discover if changes in real GDP caused a change in energy consumption, or the other way around.
This paper, unlike most of the previous studies on this issue, uses a multivariate Vector Error Correction model (VECM) to establish causality. The multivariate vector error correction model suggests that there is a unidirectional causality running from real GDP to total energy and fossil fuel consumption, implying a change in real GDP drives the energy consumption, and not the other way around. This study provides vital information to the policy makers who design policies to conserve energy and promote economic growth.
The paper was conceived in the Financial Econometrics class during the Spring Term of 2012. It was so well-received by the editorial board of the journal, they decided to publish it as the featured article. The article will be available for free download from the journal’s website in January 2013, and the print version will appear later in 2013, in volume 38.