Can Nuclear Energy Stimulates Economic Growth? Evidence from Highly Industrialised Countries

Abstract

This paper attempts to examine the causal relationship between nuclear energy consumption and economic growth for four industrialised countries; the US, Canada, Japan, and France, between 1965 to 2010. In a multivariate framework that accounts for other key determinants such that of oil demand and price, a modified version of the Granger causality test  developed by Toda and Yamamoto (1995) is applied. Results show that there is one-way causality from nuclear energy consumption to economic growth in Japan denoting that an energy conservation policy that aims to minimise nuclear energy consumption may adversely affect economic growth. Oppositely, increasing real GDP causes additional nuclear energy consumption in France. In the US and Canada, there is evidence that support the neutrality hypothesis. Looking at the other investigated channels, the level of real oil prices seems to have a vital role in deriving the demand for nuclear power in three out of four countries. There is also a causal linkage between oil and nuclear energy consumption in the US, Japan, and France, suggesting that the uncertainty surrounding the global oil market plays a key role in determining the demand for nuclear energy. This means that the policies in these countries should endeavor to overcome the constrains on nuclear energy consumption to face any un-expected hikes in oil prices, which may adversely affect economic growth in such oil importing countries. Keywords: Nuclear Energy consumption; Oil consumption; Economic growth; Oil prices; Granger causality test; Industrialised countries JEL Classifications: Q40; Q43; Q48