The Relationship between the Oil Consumption and Economic Growth: An Application of Panel Cointegration Theory

In this paper, we consider the application of recent results on the estimation and inference in panel cointegration to the Study of the relationship between the oil consumption and economic, growth. Applying the panel unit root t-bar test by IPS, we have concluded that the palel data is generated by panel unit root process, furthermore, this paper estimates the model with FMOLS and tests panel cointegration among two panel variables which describe the model with I-M test proposed by Pedroni. The results shows that there is a panel cointegration relationship among the two panel variables. which suggests that these two variables tend to move together ill the long run, and PECM indicates a significant short run adjustment from the panel cointegration, which implies the existence of the panel cointegration again. The conclusions and their implication in this paper can he taken as reference evidence for making long-run energy strategy and short-run energy policies of China.