Data Analysis of Decision Support for Sustainable Welfare in The Presence of GDP Threshold Effects: A Case Study of Interactive Data Exploration

TL;DR

This paper investigates the GDP-dependent causal relationship between energy consumption and economic growth in OECD countries, revealing threshold effects and offering insights for sustainable development policies.

Contribution

It applies threshold regression and Granger causality testing to identify GDP-specific energy-growth relationships, highlighting the importance of thresholds in sustainable economic analysis.

Findings

Energy consumption positively affects GDP below $10,936 USD threshold.

GDP Granger-causes energy consumption in the long run below the threshold.

No causal relationship between energy consumption and GDP above the threshold.

Abstract

Energy usage and GDP have been the subject of numerous studies over the past decades. It has been overlooked by previous studies that energy consumption correlates with economic growth in relation to GDP. This study uses threshold regression and Granger causality testing to identify GDP-dependent causality in ten OECD countries over the last 10 years. There is a significant correlation between economic growth and energy consumption. Energy consumption and short-term economic growth are statistically significantly correlated. There is a significant positive effect of energy consumption (EC) on GDP in the short run below the threshold of $10,936 USD since the coefficient is 3.34 and the p-value is 0.0252. There is a -0.0127 correlation coefficient and a 0.0327 p-value associated with GDP Granger-cause EC over the long run. EC and GDP are not causally related for GDP per capita above $10,936 USD. In the long run, GDP Granger causes EC with a coefficient of -0.1638 and a p-value of 0.0675. According to the study, sustainable development requires sustainable use of natural resources, technological investment, foreign direct investment, and gross fixed capital formation. Economic growth can be boosted while adhering to sustainability goals by implementing these recommendations.