The causal relationship between coal consumption and economic growth in the BRICS countries: Evidence from panel-Granger causality tests

摘要

This paper empirically analyses the causal linkages between coal consumption and economicgrowth in the BRICS countries (Brazil, Russia, India, China and South Africa) using annualdata from 1985 to 2009. Due to the common directions and principals of the BRICS countrieswith regards to energy, the employed panel causality methodology is chosen to account forboth cross-section dependence and heterogeneity across countries. Empirical results provideevidence of no causal relationship between the two variables; suggesting that neither coalconsumption nor economic growth is sensitive to each other. While this finding vindicates theneutrality hypothesis overall for the BRICS countries, the individual country results providesupport for a unidirectional causality running from coal consumption to economic growth forChina; the opposite for South Africa and bidirectional for India. Policies to reduce coalconsumption will have a detrimental effect to India’s economy. However, in the rest of thecountries, policy makers should aim at step further from fossil-fuel generation – andspecifically coal – of energy without the potential risks of having an impact to the economicgrowth and development.