Dynamic Relationship between Energy Consumption and Economic Growth in Iran

The relationship between causation of energy use and economic growth is one of the important issues of energy economy, which has been studied extensively. However, previous studies in Iran have ignored the nonlinear behavior of these two variables, which can be as a result of structural failures. In this research, the self-monitoring regression model of time parameters with probability fluctuations (TVP-VAR) is used to determine the inter-annual dynamics between the real GDP of Iran (oil, non-oil), electricity consumption, and greenhouse gas emissions in 1972-2014. The results show that the TVP-VAR model is used to study the dynamic relationship between power consumption, real GDP, and greenhouse emissions. In addition, analyzing the successive responses of GDP time, energy consumption, and greenhouse gas emissions to structural shocks suggests that these responses depend on the severity of GDP structural fluctuations, power consumption, and greenhouse gas emissions. In fact, the existence of a one-way non-linear relationship has led to economic growth as a result of energy use. This finding means that decision-makers should consider the fluctuations of real GDP, electric shock, greenhouse gas emissions, and the relationship between time-varying patterns of Real GDP, consumption electricity and emissions of greenhouse gases when deciding on energy policies.