Natural gas consumption and economic growth nexus: an investigation for France

Abstract

Purpose

The purpose of this study is to investigate the relationship between natural gas consumption and economic growth of France.

Design/methodology/approach

To analyze the relationship, an extended Cobb–Douglas production function is used. The auto-regressive distributive lag bounds testing approach is applied to test the existence of the long-run relationship between the series. The vector error correction model Granger causality approach is implemented to detect the direction of causal relation between the variables.

Findings

The results show that variables are cointegrated for the long-run relationship. They also indicate that natural gas consumption, exports, capital and labor are the contributing factors to economic growth in France. The causality analysis indicates that feedback hypothesis is validated between gas consumption and economic growth. The bidirectional causality is also found between exports and economic growth, gas consumption and exports and capital and gas consumption.

Research limitations/implications

The feedback hypothesis between gas consumption and economic growth implies that adoption of energy conservation policies should be discouraged; rather, gas consumption and economic growth policies should be jointly implemented.

Originality/value

This study is an original work for France and shows the results of the relationship between natural gas consumption and economic growth. In line with the results of this study, new direction for policy makers is opened up to formulate a comprehensive energy policy to sustain long-term economic growth in France.

Citation

Farhani, S. and Rahman, M.M. (2020), "Natural gas consumption and economic growth nexus: an investigation for France", International Journal of Energy Sector Management, Vol. 14 No. 2, pp. 261-284. https://doi.org/10.1108/IJESM-07-2019-0005