AN INVESTIGATION OF COINTEGRATION AND CAUSALITY BETWEEN ENERGY-CONSUMPTION AND ECONOMIC-ACTIVITY IN TAIWAN

Applying Hsiao's version of the Granger causality method, this paper e xamines the causality between energy and GNP and energy and employment by applying recently developed techniques of co-integration and Hsiao 's version of the Granger causality to Taiwanese data for the 1955-199 3 period. The Phillips-Perron tests reveal that the series with the ex ception of GNP are not stationary and therefore differencing is perfor med to secure stationarity. The study finds causality running from GDP to energy consumption without feedback in Taiwan. It is also found th at causality runs from GDP to energy but not vice versa. (C) 1997 Else vier Science B.V.