Natural gas consumption and economic growth nexus: Panel data analysis for GCC countries

Abstract

This study investigates the relationship between natural gas energy consumption and economic growth by including trade openness, total labor force and gross fixed capital formation as a major determinants of GDP growth within the multivariate framework model in Gulf Cooperation Council (GCC) countries. A panel GDP model is constructed taking the period of 1980-2012. The result revealed that natural gas energy consumption is cointegrated with GDP growth in the investigated countries. In addition, based on the panel dynamic ordinary least square (DOLS) and the fully modified ordinary least square (FMOLS), this study concluded that the natural gas energy consumption affects the GCC's countries GDP growth positively in the long run. Furthermore, the results from the Granger causality test revealed bidirectional causality between natural gas energy consumption and GDP growth which confirms the feedback hypothesis. From the outcome of this research, a number of policy implications were provided for the GCC countries.