Cosimo Magazzino

The relationship between CO2 emissions, energy consumption and economic growth in Italy

This study examines the relationship between CO2 emissions, energy consumption and economic growth in Italy over the period 1970–2006. Results of unit root tests show that all variables are non-stationary in their level form, but stationary in first differences form. The causal relationship between variables is examined using causality test in a vector autoregressive framework. Our empirical results show that CO2 emissions, energy consumption and economic growth are not cointegrated. Moreover, the Toda and Yamamoto Granger non-causality test shows a bidirectional causality between CO2 emissions and economic growth, as well as between CO2 emissions and energy consumption. Forecast error variance decompositions evidence that the errors in real per capita GDP are mainly due to uncertainty in GDP itself, while the errors in predicting the energy consumption and the CO2 emissions are sensitive to disturbances in the other two equations.

Optimal Size Government and Economic Growth in EU Countries

Using time-series and panel data methodologies, the paper analyzes the existence and shape of the «BARS curve» (Barro, Armey, Rahn, and Scully) for EU countries in the period 1970-2009, connecting the size of Government (measured by the share of public expenditure on GDP) to the rate of economic growth. Individual countries research has been conducted for twelve EU countries for which enough data were available, while panel analysis has been performed both for EU-27 and for some sub-groups, distinguished by their different socio-economic and monetary structures, and per capita GDP. BARS curves were generally found, and the shares of actual public expenditures generally exceed substantially those related to the maximization of GDP growth. However, great differences emerge. For the 12 countries examined by time-series techniques, the difference between the actual level and the peak of the BARS curve ranges from 2.3 points for Ireland and 18.1 points for Belgium. Similar situations were found in the panel analysis, with a smaller gap for the Anglo-Saxon countries in comparison to the Western Continental countries. For low per capita GDP countries the peak is higher than for the mature economies. Moreover, we found a long-run relationship between real GDP and public expenditure for six countries, while Granger-causality tests suggest different flows of direction for each country. So, further research may prove useful to shed light on the disparities emerging in the empirical analysis of individual countries, as well as within panel sub-groups. Results in the paper highlight that European countries are very heterogeneous in terms of the peak of the BARS curve. This evidence leads to an interesting question, i.e. if the fiscal adjustment should be the same for all the states or it should depend on the weight of the public sector on GDP in each country.

The Relationship between Real GDP, CO2 Emissions, and Energy Use in the GCC Countries: A Time Series Approach

Abstract This paper examines the relationship among real GDP, CO2 emissions, and energy use in the six Gulf Cooperation Council (GCC) countries. Using annual data for the years 1960–2013, stationarity, structural breaks, and cointegration tests have been conducted. The empirical evidence strongly supports the presence of unit roots. Cointegration tests reveal the existence of a clear long-run relationship only for Oman. Granger causality analysis shows that for three GCC countries (Kuwait, Oman, and Qatar) the predominance of the “growth hypothesis” emerges, since energy use drives the real GDP. Moreover, only for Saudi Arabia a clear long-run relation has not been discovered. Finally, the results of the variance decompositions and impulse response functions broadly confirm our previous empirical findings. Our results significantly reject the assumption that energy is neutral for growth. Notwithstanding, since the causality results are different for the six GCC countries, unified energy policies would not be the good recipe for the whole area.

Economic growth, CO2 emissions and energy use in Israel

This paper analyses the relationship among economic growth, energy use and carbon dioxide (CO2) emissions in Israel over the period 1971–2006. Results of unit root tests show that all variables are integrated of order one. Causality results suggest that real gross domestic product (GDP) drives both energy use and CO2 emissions. Forecast error variance decompositions (FEVDs) evidence that the errors in real per capita GDP are mainly due to uncertainty in GDP itself, while the errors in predicting the energy consumption and the CO2 emissions are sensitive to disturbances in the other two equations. The FEVDs show that forecast errors in real per capita GDP are mainly due to uncertainty in GDP itself, the errors in predicting the energy use are sensitive to disturbances both in the GDP and in CO2 equations, while the forecast errors in CO2 emissions should be essentially connected to emissions itself. Finally, the vector autoregression (VAR) forecast represents an improvement in simpler forecasts in more than half the comparisons.

CO2 emissions, economic growth and energy use in the Middle East countries: A panel VAR approach

ABSTRACT The article explores the nexus between carbon dioxide emissions, economic growth, and energy use for 10 Middle East countries over the period 1971–2006. We use a panel VAR technique for the empirical analysis. The three-variable VAR estimate shows that for the six GCC countries the response of economic growth to CO2 emissions is negative in the estimated coefficients and impulse responses. CO2 emissions seem\ to be driven both by its own past values and by energy use. For the other four non-GCC countries, the result of our particular interest is the response of real GDP: neither CO2 emissions nor energy use seems to have an impact on growth, which is determined by its own lagged values. While the errors in predicting the energy use are sensitive to disturbances in the energy use equation. Thus, for GCC countries, our results suggest that the “growth hypothesis” holds. For the remaining four non-GCC countries we found that forecast errors in energy use are mainly due to energy use itself; while the forecast errors in economic growth should be essentially connected to real GDP itself. Thus, these findings represent an empirical support for the “neutrality hypothesis.”

On the Relationship between Disaggregated Energy Production and GDP in Italy

This paper tries to assess the relationship between disaggregate energy production and real aggregate income in Italy by undertaking cointegration analyses using annual data from 1883 to 2009. After a brief introduction, a survey of the economic literature on this issue is shown, before discussing the data and introducing some econometric techniques. Stationarity tests reveal that the series are non-stationary, or I(1). Cointegration analyses reveal that there is a long-run relationship between GDP and geothermoelectric production in the 1919–1939 period. Whilst, for the post-war years, we find a cointegration relationship for all sources of energy. Causality tests roughly confirm a bi-directional flow in the long-run, so that energy production and economic growth complement each other, since economic growth may demand more energy, whereas more energy consumption may also induce economic growth.

Energy Consumption and GDP in Italy: Cointegration and Causality Analysis

The aim of this article was to assess the empirical evidence of the nexus between GDP and energy consumption for Italy during the period 1970–2009, using a time series approach. After a brief introduction, a survey of the economic literature on this issue is shown, before discussing the data and introducing some econometric techniques. Stationarity tests reveal that both series are nonstationary, or I(1). Moreover, a cointegration relationship is found between the two variables. The short-run dynamics of the variables show that the flow of causality runs from energy use to GDP, and there is a long-run bidirectional causal relationship (or feedback effect) between the two series. Consequently, we conclude that energy is a limiting factor to GDP growth in Italy and that energy conservation policy should be formulated and implemented wisely.

Credit rating agencies: The importance of fundamentals in the assessment of sovereign ratings

The aim of this paper is to investigate the significance of a set of macroeconomic variables in the assessment of the sovereign ratings provided by the three main credit rating agencies in different periods in time and for countries belonging to different cate gorizations. Ratings have a great economic importance as they constitute the main drivers for attracting foreign investments and can influence the dynamics of interest rates. By grouping the countries according to levels of development and indebted ness, we provide the analysis of the weights attributed to each one of the macroeco- nomic indicators included in the analysis. Furthermore, it is of interest to examine how ratings are constructed and if they exhibit a historical coherence that goes be yond the economic cycles. The analysis rests on an unbalanced panel of 139 countries in the period 1975- 2010. In order to provide an answer to ratings’ historical coher- ence, we selected two sub-periods: 1975-1996 and from 1997 onwards. Static esti mates findings show that per capita GNI, inflation, unemployment, fiscal balance, government debt and default history significantly affect ratings, while GNI growth and current account balance are less relevant. Furthermore, Granger causality results underline that a one-way causality runs from average ratings to economic growth.

Public Expenditure and Revenue in Italy, 1862–1993

This study examines the long-run equilibrium relationship between government expenditure and revenue in Italy from 1862 to 1993, using cointegration techniques and the direction of causality relationship in the long and short runs between the variables through integrating the Error Correction Model (ECM) into the traditional Granger causality test. A Granger non-causality test (due to Toda and Yamamoto) is also performed. Unit root tests have been applied in order to investigate the stationarity properties of the series. Moreover, three more homogeneous sub-period (1862-1913; 1914-1946; 1947-1993) have been analyzed. The nexus between public expenditure and revenue has been discussed also by Impulse Response Functions (IRFs) and Forecast Error Variance Decompositions (FEVDs). Empirical findings show how, for each sub-period, the policy adopted reflect the prevailing paradigm of public finance (neutral or orthodox finance, Keynesian finance and discretionary or compensatory finance, respectively).

Is Per Capita Energy Use Stationary? Panel Data Evidence for the EMU Countries

The aim of the study is to examine the stationary properties of per capita energy use in the 19 Eurozone member countries by using yearly data in the 1960–2013 period. First and second generation of panel unit root tests are applied. Empirical findings show mixed results, since the evidence favors the panel stationarity of energy use per capita in all groups of countries for the specification with the constant only; on the contrary, in the specification with constant and trend, the null hypothesis that all series are non-stationary cannot be rejected. Therefore, policymakers should be cautious, paying attention to the energy use series’ properties, as different results conduct to opposite policy implications.