Investigating the Effects of the United States’ Economic Slowdown Related to the COVID-19 Pandemic on Energy Consumption in Other Countries—A Global Vector Autoregressive Model

• Main Authors: Sailan Hu, Rongrong Li
• Format: Article
• Language: English
• Published: MDPI AG 2021-05-01
• Series: Energies
• Subjects: COVID-19; spillover effects; US economic growth; energy consumption; GVAR
• Online Access: https://www.mdpi.com/1996-1073/14/11/2984

The COVID-19 pandemic has caused a drop-in economic activity and energy consumption of the United States. This work aims to investigate the spillover effects of the United States’ COVID-19 economic recession on economic growth and energy consumption in other nations using a global vector autoregressive (GVAR) approach and quarterly data between 1990 and 2013 from 41 major countries/regions. On the one hand, the simulation results indicate that the US COVID-19 recession has a negative impact on other countries’ economic growth through trade ties, reducing the economic growth of other countries, especially for countries which have a close trade relationship with the US. In addition, the spillover effects of the US economic recession have different impacts on other countries’ energy consumption. Countries with the closest trade ties to the US are most affected, such as Japan and China. In addition, the impact of the US’ economic shock on energy consumption in developing countries is significant in the short term, while its impact on developed countries is significant in the long term. On the other hand, the simulation results of energy spillover effects indicate a reduction in US energy consumption slightly reduces economic growth in other nations. In addition, a reduction in energy consumption in the US does not have a significant negative impact on energy consumption in other developed countries. Furthermore, the spillover effect of declining energy consumption in the US on energy consumption in developing countries is significant in the short term. However, the spillover effects of falling energy consumption in the US on developing countries are different. The spillover effect of the decline in energy consumption in the US causes a slight decline in energy consumption in China and Brazil, whereas the spillover effect of the decline in energy consumption in the US does not cause a decline in energy consumption in India and Brazil.