Causality relationship between the photovoltaic market and its manufacturing in China, Germany, the US, and Japan

This paper aims to investigate the Granger causality relationships between the photovoltaic (PV) market scale and PV manufacturing development in China, Germany, the US, and Japan, and consequently provide recommendations for strategic investment and industrial policy making. The empirical results show that the growth of the market scale caused the increase in innovation scale in the four countries except China. Moreover, there were bidirectional causalities between them in Germany and in the US, respectively, suggesting that the strategic perspective and the formation of a virtuous circle could make PV industry policies cost effective. Only in China did the growth of the market scale cause the increase in production scale, implying significant market risk for the manufacturing sector. The empirical result shows that the manufacturing sector can affect the dynamics of the market scale.