| Abstract [eng] |
The main purpose of this Master’s thesis is to examine whether energy consumption has a statistically significant long- or short-run causal relationship with economic growth in the Baltic States—Estonia, Latvia, and Lithuania—over the period 1998–2023. The work is grounded in energy-augmented growth theory and explores the direction, presence, and strength of the relationship between energy use and GDP per capita, while controlling for labor and capital inputs. The thesis is structured into four main parts. The first part presents the theoretical background, offering a critical review of classical and energy-augmented economic growth models, the second one summarizes key empirical findings and hypotheses from international energy–growth literature. The third part outlines the research methodology, detailing data collection, variable selection, and the econometric strategy employed. The fourth part focuses on empirical analysis, interpretation of results, and formulation of conclusions and recommendations. Empirically, the study applies a robust panel data framework. It begins by testing for stationarity using panel unit root tests and then evaluates long-run relationships among variables through Pedroni and Kao cointegration tests. To estimate the long-run elasticities of output with respect to capital, labor, and energy, both Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) estimators are used. Short- and long-run causality dynamics are assessed using a Panel Vector Error Correction Model (PVECM), allowing for both temporal and structural insights into the energy–growth nexus. The findings confirm the existence of long-run cointegration between GDP, energy use, labor, and capital across the three Baltic states, indicating a stable long-term association. However, Grangercausality tests reveal no statistically significant causal link from energy to growth or vice versa, thus supporting the neutrality hypothesis. These results suggest that energy consumption in the Baltic region does not act as a direct driver of economic growth. Accordingly, energy policy should not be centered solely on stimulating GDP but should instead emphasize goals such as sustainability, energy security, and resource efficiency. The study recommends future research to disaggregate energy data by sector and explore higher-frequency datasets to detect potential hidden or delayed effects that may not be visible in aggregate annual data. |
