Abstract:This paper studies the relationship between energy consumption and economic growth for Iran during .we use time varying parameter (TVP) Approach to estimate effect of energy consumption on GDP over time. Our main finding is theenergy consumptionhas a positive sign and it is statistically significant .the final coefficient is 0.037. This parameter varies trivially over time and fluctuations are rather stable. IntroductionImpact of energy consumption on economic growth is as one of the most popular issues after the first oil shock in the field of energy economic. Studying this topic determines the relationship between energy consumption on economic development and provides the basis for discussion of energy policy and environmental conservation. Although economic theoriesdon't explicitly specify this relationship, but there are many empirical studies in this area. Yu and Choi (1985), Ferguson et al. (2000) , Toman and Jemelkova (2003) and Chontanawat et al.(2008) explain the lack of any clear results on the relationship between energy use and economic growth couldbedue tovarying energy consumption patterns, the heterogeneity in climate conditions, , the structure and stage of economic development within a country, different econometric methodologies employed and the presence of omitted variable bias along with varying time horizons of the studies conducted. Kraft and Kraft (1978) ispioneering research for the years 1947 to 1974 were examined energy consumption and economic growth in America. The results show unidirectional causality from GDP to energy consumption dominates the economy of America. Akarca and Long (1980), Yu and found that energy consumption andGDP were independent in the United State. Lee and Chang (2005) examined the effect of energy consumption on economic growth in Taiwan from 1955 to 2003. Results of this study showed that economic growth and energy consumption have nonlinear dependence between variables. StudyingNarayan and Smith (2007) also showed that investment, real GDP and energy consumption in G7 countries, are integrated. Capital and energy in the long term causedto economic growth.

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