Modelling Economic Growth and Energy Consumption in MENA Countries: Cointergration and Causality Analysis

Abstract

This paper investigates the causal relationship between energy consumption and economic growth for Algeria, Egypt, Iran, Jordan, Morocco, Saudi Arabia, Tunisia and United Arab Emirates from 1975 to 2011. To examine this relationship, we use approach of cointegration and Granger causality analysis. The cointegration test results show that there is no cointegration between the energy consumption and the economic growth in six of the eight countries. there is no a relationship between energy consumption and economic growth in Jordan; Saudi Arabia; Tunisia and United Arab Emirates. The granger causality indicate that one-way Granger causality from economic growth to energy consumption in Algeria and one-way strong Granger causalities from energy consumption to economic growth in Egypt; Morocco and Iran. The overall results indicate that there is no relationship between the energy consumption and the economic growth in most of the MENA countries.