The Impact of Energy Consumption on Economic Performance in the Era of Globalization

Energy is an important input for most industrialized and developing countries, where energy is used as a direct or indirect input in the production of most goods and services, and transportation. In addition, nowadays, energy market globalization such as energy industry transformation, multinational energy cooperation and opening energy market is apparent around the world. In order to gain more insightful understanding of the connection between economic growth and energy consumption due to energy globalization, the purpose of this paper is to investigate the impact of energy consumption on economic performance. The panel data of world and regional real GDP, population, capital formation and energy consumption for 29 years, starting from 1980 to 2008, are constructed from World Development Indicators of World Bank and International Energy Statistics of EIA, respectively. The explanation of globalization in energy market and energy consumption are reviewed and connected to the world and regional economic performance. In addition, the econometric analysis of panel data, such as panel unit root test, panel cointegration test, is applied to this empirical research. The results show a causal relationship between various energy consumptions and economic performance in the period of globalization.