How Dependent is Output Growth Z. Kahraman, TSP from Primary - - PowerPoint PPT Presentation

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How Dependent is Output Growth Z. Kahraman, TSP from Primary - - PowerPoint PPT Presentation

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How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and How Dependent is Output Growth Z. Kahraman, TSP from Primary Energy ? I. Why is this relationship important ? I.1. Kayas equation

slide-1
SLIDE 1

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

How Dependent is Output Growth from Primary Energy ?

Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman, TSP

March 28, 2014

slide-2
SLIDE 2

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • I. Why is this relationship important ?

I.1. Kaya’s equation

  • Source : BP statistical review, 2012, Shilling et al. 1977, EIA, 2012,

et Banque Mondiale (PIB), 2012.

slide-3
SLIDE 3

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • Source : OECD.
slide-4
SLIDE 4

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • Source : OECD.
slide-5
SLIDE 5

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • ∆ Y

Pop = ∆ E Pop × Y E

  • .

∆ Y

Pop:= growth of GDP per capita.

∆ E

Pop := growth of energy consumption per capita.

∆ Y

E := growth of energy efficiency.

slide-6
SLIDE 6

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • ∆ Y

Pop = ∆ E Pop × Y E

  • .

∆ Y

Pop:= growth of GDP per capita.

∆ E

Pop := growth of energy consumption per capita.

∆ Y

E := growth of energy efficiency.

  • Taking the log...

∆ ln Y Pop = ∆ ln E Pop + ∆ ln Y E .

slide-7
SLIDE 7

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • The relationship in terms of per capita quantities :

Source : BP statistical review, 2012, Shilling et al. 1977, EIA, 2012, et Banque Mondiale (PIB), 2012.

slide-8
SLIDE 8

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • 1965-1981 : world average

3.5% = 2.5% + 1%

slide-9
SLIDE 9

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • 1965-1981 : world average

3.5% = 2.5% + 1%

  • 1981-2013 : world average

1.5% = 0.5% + 1%

slide-10
SLIDE 10

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • 1965-1981 : world average

3.5% = 2.5% + 1%

  • 1981-2013 : world average

1.5% = 0.5% + 1%

  • Japan : 2000-2013 :

0% = 0% + 0%...

slide-11
SLIDE 11

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • 1965-1981 : world average

3.5% = 2.5% + 1%

  • 1981-2013 : world average

1.5% = 0.5% + 1%

  • Japan : 2000-2013 :

0% = 0% + 0%...

slide-12
SLIDE 12

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

slide-13
SLIDE 13

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

slide-14
SLIDE 14

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

slide-15
SLIDE 15

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

slide-16
SLIDE 16

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • I. Why is this relationship important ?

I.2. Why is this relationship ignored ?

  • No such obvious relation in terms of energy prices.
slide-17
SLIDE 17

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

slide-18
SLIDE 18

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • The cost-share theorem

max

x

Y (x) − p · x (1)

slide-19
SLIDE 19

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • The cost-share theorem

max

x

Y (x) − p · x (1)

  • εi :=

xi Y (x) × ∂Y ∂xi (x) = pixi p · x (2)

slide-20
SLIDE 20

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • max

x

Y (x) − p · x s.t. f (x) = 0 (3) f (·) : geological, technical, political... constraints.

slide-21
SLIDE 21

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • max

x

Y (x) − p · x s.t. f (x) = 0 (3) f (·) : geological, technical, political... constraints.

  • εi =

xi

  • pi − λ ∂f (x)

∂xi

  • p · x − λxi

∂f (x) ∂xi

. (4) λ = Lagrange multiplier.

slide-22
SLIDE 22

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • max

x

Y (x) − p · x s.t. f (x) = 0 (3) f (·) : geological, technical, political... constraints.

  • εi =

xi

  • pi − λ ∂f (x)

∂xi

  • p · x − λxi

∂f (x) ∂xi

. (4) λ = Lagrange multiplier.

  • Decoupling between output elasticity and cost share.
slide-23
SLIDE 23

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • II. The empirical estimation

II.1. A PMG approach

  • Cointegration = Correlation.
slide-24
SLIDE 24

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

slide-25
SLIDE 25

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • II. The empirical estimation

II.1. A PMG approach

Table: Country List

Austria Grece Slovak Pepublic Belgium Ireland Spain Finland Italy United Kingdom France Netherlands Japan Germany Portugal United States From 1970 to 2011.

slide-26
SLIDE 26

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • Variables under scrutiny:

Logarithm of:

  • Primary energy consumption (million tons of oil equivalents) -

BP Statistical Review of World Energy 2012.

  • GDP (in 2000 U.S $) World Bank, World Development

Indicators.

  • Gross Fixed Capital Formation (in 2000 U.S $) World Bank,

World Development Indicators.

  • Population data - World Bank, World Development Indicators.
slide-27
SLIDE 27

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • The main equation:

ln GDPi,t = βi,0+βi,1 ln NRJi,t+βi,2 ln EFFi,t−1+βi,3 ln Ki,t+εi,t. All the variables are per capita.

slide-28
SLIDE 28

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

  • The main equation:

ln GDPi,t = βi,0+βi,1 ln NRJi,t+βi,2 ln EFFi,t−1+βi,3 ln Ki,t+εi,t. All the variables are per capita.

  • Energy efficiency is lagged in order to avoid tautological
  • ver-identification.
slide-29
SLIDE 29

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

Is there a (hidden) long-run relationship ?

slide-30
SLIDE 30

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

Is there a (hidden) long-run relationship ?

  • Westerlund panel cointegration test also strongly reject the

(no-cointegration) null hypothesis.

slide-31
SLIDE 31

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

Can we quantify this long-run relationship ? The short-run speed of convergence towards the equilibrium relation ?An ECM approach: ∆ ln Yt = γe∆ ln Et − βe(ln Yt − αe ln Et) + εt. αe : long-run output elasticity of energy use. βe : speed of

  • convergence. γe : out-of-equilibrium short-run output elasticity
  • f energy.
slide-32
SLIDE 32

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

slide-33
SLIDE 33

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

Is there a causality link ?

  • Kraft & Kraft (1978), D. Stern (1993), Ozturk (2010), D. Stern

(2011) Non-conclusive causal relationship between quantities Except for Sweden over 1 century (Stern (2011)). Strong relationship in terms of prices. (Cf. Hamilton...)

slide-34
SLIDE 34

How Dependent is Output Growth from Primary Energy ? Gael Giraud CNRS, PSE, CES, Labex REFI and

  • Z. Kahraman,

TSP

  • I. Why is this

relationship important ? I.1. Kaya’s equation

  • I. Why is this

relationship important ? I.2. Why is this relationship ignored ?

  • II. The empirical

estimation II.1. A PMG approach

  • II. The empirical

estimation

Is there a causality link ?

  • Kraft & Kraft (1978), D. Stern (1993), Ozturk (2010), D. Stern

(2011) Non-conclusive causal relationship between quantities Except for Sweden over 1 century (Stern (2011)). Strong relationship in terms of prices. (Cf. Hamilton...)

  • Granger panel tests (valid since cointegration):