Causality relation among energy consumption, employment and GDP Iran 1971 - 2005

As one of the most important factor in production, which has special effect on all economic sectors is energy. Especially in developing countries, because of the competition to achieve scarce resources, what is important is, which of the macro economic variables has effect on another one. In the study, cointegration analysis and Hisao causality tests are used to examine the causal relationship among energy consumption, employment and gross domestic product (GDP) for Iran over the period 1350 to 1383. Johanson (1988)cointegration test result indicates these three variables are cointegrated with three contegrating vectors. The results from Hisao causalty test suggest unidirectional Grange causality from employment to GDP and energy consumption and from energy consumption to GDP. Furthermore, the impules response and variance decomposition are also incorporated into analysis. Energy consumption appears to have led to GDP growth in Iran over this period. The policy implication of this finding is that energy conservation will restrain the GDP growth in Iran,so a policy that increase the productivity of energy consumption is recommended instead of reduce of quantity of energy consumption in and it is better to move energy consumption frm household sector that has little productivity to productive sectors.