Causal relationship between coal consumption and economic growth in Korea

This paper investigates the short- and long-run causality issues between coal consumption and economic growth in Korea by applying modern time-series techniques. It employs annual data covering the period 1968–2002. Tests for unit roots, co-integration, and Granger-causality based on error-correction model are presented. The overall results show that there exists bi-directional causality running from coal consumption to economic growth with feedback. This means that an increase in coal consumption directly affects economic growth. Thus, in order not to adversely affect economic growth, Korea should endeavor to overcome the constraints on coal consumption. Moreover, the study lends support to the argument that an increase in real income gives rise to increased coal consumption.