THE BIDIRECTIONAL RELATIONSHIP BETWEEN CONSUMPTION OF BIOFUELS AND ECONOMIC GROWTH IN BRAZIL: AN APPROACH WITH VAR MODEL
03 - Bioenergy: Economy, Market and Policy
1 MATHEUS DA COSTA KOENGKAN
1 UNIVERSIDADE FEDERAL FLUMINENSE
The causality relationship between consumption of biofuels and economic growth was examined in Brazil, over the period of 1990 to 2015. The Vector Autoregressive (VAR) was applied. So, the preliminary tests, such as, Determinant of the correlation matrix, Bartlett’s test for sphericity Kaiser-Meyer-Olkin measure of sampling adequacy, Variance Inflation Factor (VIF), Augmented Dickey-Fuller test for unit root, and the VAR selection-order criteria test, indicated the that all the measures are correlated, the variables are not intercorrelated, the factor analysis of the variables is mediocre, the low-multicollinearity, cross-section dependence, unit roots, and the need to use the lag length (5) in the VAR model. Furthermore, the results of VAR model indicated that the economic growth increases the consumption of biofuels in 3.3973%, while the consumption of oil decreases -1.7729 %; The consumption of biofuels has a positive impact on economic growth of 0.1448 %, and in oil consumption 0.4049 %, and finally the consumption of oil has a positive influence of 0.2190 % in economic activity, and in consumption of biofuels 1.8070 %. Moreover, the specification tests, such as, Granger Causality Wald test, the normally distributed disturbances test, Eigenvalue stability test, and the Wald lag exclusion statistics test pointed to the existence of a bidirectional relationship between consumption of biofuels, economic growth, and consumption of oil, that the VAR model has a normally distributed, that the VAR model does not satisfy stability condition, that the all variables in the VAR model are endogenous. Finally, the result of this study is an opportunity for the policy makers to change the energy matrix with the introduction of more renewable energy sources in order to reduce the environmental degradation, as well as, the renewable public polices that promotes the creation of new jobs and income in long-run.
Keywords: biofuels;brazil;econometric; energy economics;renewable energy.
