Relationship between Energy Consumption and GDP in Iran

Abstract

This paper tries to unfold the linkage between energy consumption and GDP by undertaking a co-integration analysis for Iran with annual data over the period 1980-2010. The analysis shows that energy consumption and GDP are co-integrated. This means that there is (possibly bi-directional) causality relationship between the two. We establish that there is a unidirectional causality running from GDP to energy consumption indicating that energy saving would not harm economic growth in Iran. In addition, we find that energy consumption keeps on growing as long as the economy grows in Iran.

Key words: Error correction; Iran; energy consumption; economic growth; Kuznets Curve.