Energy Consumption, Electricity, and GDP Causality; The Case of Russia, 1990-2011

This article examines the causal relationship between the energy consumption, electricity consumption and GDP in Russia by using time series data from 1990-2011 implying the Toda and Yamamoto approach, which is revised form of the Granger (1969) causality test (Econ. 66 (1995) 225). The maximum order of integration was determined by using PP and ADF unit root tests. The Toda and Yamamoto test is applied regardless of whether the series are I(0), I(1), or I(2), mutually cointegrated or non-cointegrated. The variables were estimated at level in the unrestricted lag-augmented VAR. The AIC, SC and LR lag criteria were used to determine the optimal lag length. The diagnostics tests were performed at the optimum lag selected by estimating the variables at level and confirmed the stability of the unrestricted VAR model. The empirical evidence showed that there exists a the bi-directional causality from electricity consumption to GDP that implies the validity of feedback hypothesis but no causality was found for GDP and energy consumption supporting the neutrality hypothesis. The estimated results confirmed that both the economic growth and electricity consumption empirically support each other and have a mutual and complementary relationship. But on another hand the energy sector of Russia has no impact on the economic growth for a period 1990-2011. Furthermore, if the Government of Russia devises policies to promote the access of energy and higher level of consumption, economic growth will not be affected.