Energy-Gross Domestic Product Nexus: Disaggregated Analysis for the Czech Republic in the Post-Transformation Era

Abstract

This article contribution is two-fold. It presents new results based on quarterly frequency disaggregated data for the Czech Republic. It also goes through extensive identification of methodological deficiencies present in the literature and proposes a methodology to determine the direction and also the sign of the causality in the energy-economy nexus. The proposed improvements are illustrated on the case of Czech Republic during the period 1996-2011 in quarterly frequency. The data are taken in disaggregated form; the model estimates cover aggregate and sectoral levels of final energy consumption, and also fuel-specific consumption and sectoral electricity consumption. The evidence for the conservation hypothesis with a positive sign of the causality is found for, (i) The consumption of the solid fuels, (ii) the electricity consumption in the transportation sector, (iii) the final energy consumption of the industrial sector, and (iv) the electricity consumption of the industrial sector. Given the fact the solid fuels are: (a) Used heavily for the electricity generation in the Czech Republic, (b) the main differentiating fuel between the Czech and European Union industrial energy consumption, and (c) could contribute to the other environmental targets, it seems reasonable to favor the reduction of the solid fuels consumption in the Czech energy conservation plans.Keywords: Energy; Gross Domestic Product; Energy conservation; Czech RepublicJEL Classification: Q43