Is causality between globalization and energy consumption bidirectional or unidirectional in top and bottom globalized economies?

Abstract

By using quarterly data over the period 1970Q1-2017Q4, this paper examines the dynamic causal relationship between globalization and energy consumption by using rolling and recursive rolling Granger causality methods. This study is pioneering effort to examine the dynamic causal relationship between globalization and energy consumption using time-varying Granger causality tests for 20 top and bottom globalized economies. The empirical results reveal that the dynamic causality relationship between globalization and energy consumption is time-varying. Although, the causal relationship could not be observed for some of the study periods, bidirectional causality is found in many sub-samples. From the empirical findings, we observe that unidirectional causality running from globalization to energy consumption has grievous impact on trade and environmental quality. In general, our empirical results resonate with the previous findings of globalization energy-driven hypothesis, with significant policy implications for top and bottom globalized countries.