Economic Growth and Energy Consumption: New Evidence Using a Continuous Wavelet Approach

This study examines the relationship between energy consumption and economic growth in the Iranian economy. To that end, a wavelet transformation technique is used, which allows us to combine the time domain and frequency domain characteristics of two time series together. Using this approach and data for the period 1991:2 – 2017:1, this study tries to overcome the shortcomings of  standard econometrics and shed more light on the relationship between energy consumption and economic growth in Iran. The results show a short-term causality effect from energy consumption to economic growth only in the early 1990s.  There is not any significant relationship between energy consumption and economic growth in the long run. Therefore, adopting energy consumption management policies to protect the environment and natural resources, can reduce energy consumption without hindering economic growth in Iran.