Energy Cycles: Nature, Turning Points and Role in England Economic Growth from 1700 to 2018

Abstract

Business cycles are among the most discussed topics in social sciences. Environmental changes, heatwaves and natural disasters as consequences of anthropogenic activities are headwinds to future economic growth and development. There is an ongoing debate on environmental degradation and its socio-economic impact. Here we investigate the existence of primary energy (coal, gas, oil, nuclear, solar, thermal, wind) cycles in England from 1700 to 2018. Using turning points methodology (Harding & Pagan, 2002), we isolate energy cycles and explain their phase characteristics. Offering empirical evidence of energy cycles existence should assist policymakers to gain additional quantitative knowledge to understand and contain business cycles. Fossil fuels energy cycles are closely linked to business cycles, but renewable energy cycles are pushing forward, targeting the leading role. Energy cycles are the missing link in the literature needed to understand business cycles and future economic development. In this study, we supply knowledge for understanding energy cycles and their relationship to the business cycles. The estimated concordance index reveals a systematic relationship between energy and business cycles with conclusive results. Energy cycles in this century will become a major force driving socio-economic events. Managers in the firms and policymakers on the macro-level will need knowledge on energy cycles since tracking energy cycles soon will become more important to tracking business cycles. To this end, our study contributes to the study of energy cycles as the source of business cycles.