The causal relationship between the consumption of energy and trade in developing countries

Abstract

As an important factor in production, energy plays a remarkable role in economic development and growth of countries, on the other hand, energy use in developing countries is to a great extent influenced by economic growth. Also, in recent decades, as a part of GDP, trade has had a significant role in economic growth of countries. Therefore, studying the relation between energy and trade can efficiently contribute in policy making of energy and foreign trade sectors. In this paper, panel unit root, panel co integration and panel causality tests have been performed in order to investigate the relation between energy consumption and trade among 70 developing countries during the period of 1980- 2010. These countries have been selected based on available statistics and data. These findings have policy implications for macroeconomic planners results show that in short term there is a unilateral causal relation from export (import) to consumption of energy. Common or strong causal findings also verify bilateral causality between export (import) and consumption of energy.