The Relationship between Energy Production and GDP: Evidence from Selected European Economies

Abstract

The aim of this article was to investigate the possible relationship between energy production and GDP growth. This problem is of a crucial importance because as a numerous studies show, it is difficult to give an unambiguous answer to the question of whether there is a relationship between GDP and energy production and what direction it takes if it exists, i.e., whether energy production drives GDP growth or GDP growth drives energy production. The research conducted by the authors used data on hourly power production in MWh/h averaged over a whole day, which were converted into total quarterly production. The data were divided in terms of the type of energy into conventional, renewable, other and total. Next, the correlation coefficient was calculated for proper data sets in order to determine whether there was a correlation between the variables. The main conclusion from the study is the fact that a correlation measured with the Pearson correlation coefficient is not reflected in the data. Changes in power production independent of the source of power do not influence the GDP directly. Naturally, in some countries, the connection between power production and GDP was stronger; however, comparing this to the rest of the researched countries, where correlation was low or even extremely low, it can be seen that the relationship is random. This study should be seen as an introductory one with a perspective of broadening research in terms of causality between variables, which, nowadays, has great application in terms of climate change and sustainable development.

Keywords

• economic growth
• energy production
• conventional power sources (CNV)
• renewable energy resources (RES)