Interactions of energy and the macroeconomy: 95 years of evidence
A series of single equation dynamic regression models are constructed to test the hypotheses that both ''thermodynamic'' and economic efficiency configurations of lagged energy variables are statistically informative about subsequent macroeconomic activity, as represented by changes in real GNP per capita and unemployment rate. The time period tested in most versions of the models is the 1891-1985 period. The ''thermodynamic'' efficiency (t-efficiency) variable counts changes in the use of per capita energy per unit of national output (real GNP per capita). The economic efficiency (e-efficiency) variable is the more traditional price effect variable, in which changes in the real price of energy are tested for their effect on macroeconomic aggregates. The interactive effects of energy price and quantity shifts relative to macroeconomic aggregates are also assessed by use of a ''combined efficiencies'' variable which can also be interpreted as a measure of the difference of changes in energy spending and changes in national output. Of the tested energy variables, the combined energy efficiencies variable is clearly the best and most consistent provider of information about future macroeconomic activity. Macroeconomic activity is found to be much less informative about the energy variables than are the energy variables about macroeconomic activity. Consequently one way tests are conducted in which the informativeness of the combined energy efficiencies variable about subsequent macroeconomic activity is compared to the informativeness of money about subsequent macroeconomic activity. These tests infer that both energy and money are important, but that energy is a more consistent performer and better explainer of variation than money. It is also found that the incremental explanatory power of energy improves when it is included in an equation with money, and similarly, the incremental explanatory power of money improves when it is included in an equation with energy.
- Research Organization:
- Argonne National Lab., IL (USA)
- DOE Contract Number:
- W-31109-ENG-38
- OSTI ID:
- 6724625
- Report Number(s):
- CONF-861158-10; ON: DE87006982
- Resource Relation:
- Conference: 8. North American International Association of Energy Economists conference: changing world energy economy, Cambridge, MA, USA, 19 Nov 1986; Other Information: Portions of this document are illegible in microfiche products
- Country of Publication:
- United States
- Language:
- English
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