The Study on the Relationship between Energy Consumption and Economy Growth in China Based on VAR Model

Energy is the basis of the human existence and social activities, the development of every country needs the support which is supplied by energy. Energy is the development of the national economy and is a necessary and important material foundation to people´s livelihood, it is also extremely important to social development and the improvement of people´s living standards. Studying the relationship between China´s energy consumption and economy growth has an important theoretical and practical significance. In this paper, we use ADF test to test the stationary of energy consumption and GDP based on the data from 1990 to 2006, establish VAR model, then forecast and analysis the impulse response, lastly, use Granger causality test to determine the relationship between energy consumption and economy growth.