Energy Consumption and Economic Growth in OPEC Member Countries: New Empirical Evidence using the Panel Co-Integration with Cross-Sectional Dependence

The relationship between energy consumption and economic growth play an important role for energy policies. This relationship depends on the presence or absence ofcross-sectional dependence. therefore, cross-sectional dependence should be taken into consideration in empirical studies. This paper investigates the relationship between energy consumption and economic growth in OPEC member countries (including Iran) during the period 1980-2011 taking into consideration the Cross-Sectional Dependence. In this regard, we used the Pesaran’s cross-sectional Test (2004), cross-sectional augmented IPS (CIPS) unit root test and Westerlund’s co-integration test (2007). To estimate long-run coefficients we used the continuously-updated and fully-modified (Cup-FM) method sproposed by Bai et al (2009). The short-run coefficients have been estimated using pooled mean group approach sproposed by Pesaran et al (1999). The results indicate a positive impact of energy consumption on economic growth in OPEC countries in long-run and short-run. Also, in the short-term and long-term, there is atwo-way causality between economic growth and energy consumption which support the feedback hypothesis