Test of Co-Movement between Electricity Consumption and Economic Growth in China

In the paper, we propose a novel method based on wavelet analysis to test the impact of specific frequency fluctuation of series in establishing the cointegration and Granger causality among series. The method is rather time domain oriented and can rely on the standard procedure of error correction model. Then we use the method to test for electricity consumption and economic growth in China. Our test results indicate that electricity consumption is the frequency Granger cause of economic growth in both the short and long run. It also indicates that the cointegration between electricity consumption and economic growth is operated with the low frequency business cycle movement.