Research on the Inner Relationship Between Chinese Economic Growth and Energy Consumption-Based on Granger Causality Test of the VECM Model and Grey Relevance Analysis

This paper estimates the relationship between Chinese total energy consumption and economic growth through ADF test, cointegration analysis and Granger causality test on Cobb-Douglas production function with the variable total energy consumption by using 1990-2011 time-series data and finds the long-term equilibrium relationship and Granger causality between Chinese total energy consumption and economic growth. We find that no matter in short-term or long-term, GDP and fixed capital present two-side Granger causality, as well as GDP and energy consumption. Also, to explore which industry contributes the most in energy consumption, we build the grey relational grade model of total energy consumption, GDP and energy consumption of three industries and find the tertiary industry contributes the most.