Investigating the Relationship between Energy Consumption and Growth of Economic Sub-sectors in Iran (1967-2007): Vector Error Correction Model Approach

Energy has become an important factor in the production function. This paper investigates the relationship between energy consumption and growth in different economic sectors in Iran for the period 1346 to 1386. The study uses co-integration techniques and the vector error correction model. The results confirm a long-run unidirectional causality from electricity consumption to growth in industrial and agricultural value added. There is also a long-run unidirectional causality from gas consumption to increases in value added in industry. In addition, there is unidirectional causality from consumption of oil products to increases in value added of services.