Co-integration-based analysis of energy assurance for steady economic growth in China

Abstract

By applying co-integration analysis, the Granger causality test and an error correction model, the dependency between the energy consumption and the gross domestic product of China was examined. In a further step an analysis was done to establish a correlation between the economic growth of different industries and China's energy consumption. An evidence-based study showed that a co-integration relationship exists between the gross energy consumption and the GDP of China and that the two variables possess bi-directional causality. The energy consumption for the secondary industry has a markedly stimulative effect to the economic growth. This paper also uses an error correction model (ECM) to explain the short-term behavior of energy demands.