Energy Consumption and Economic Growth: A Case Study of Three SAARC Countries

European Journal of Social Sciences 09/2010; 16(2):206-213. DOI: 10.2139/ssrn.2124639


Energy is a crucial component to economic growth and plays a vital role in economic
development. This study inquires the causal relationships between energy consumption
(EC) and the economic growth (EG) within a multivariate framework that includes capital
stock and labor input for the panel of three SAARC countries by using modern panel unit
root technique, residual based panel cointegration and panel based error correction models
.The empirical results fully support a cointegration relationship between EC and EG in the
long run. But from the causal point of view there is long run unidirectional causality
running from EC to EG and no causality was found in the short run.

Download full-text


Available from: Kashif Imran, Oct 04, 2015
79 Reads
  • Source
    • "The results suggest causality runs from energy consumption to GDP in Turkey, France, Germany and Japan, and from GDP to energy consumption in Italy and Korea. Imran and Siddiqui (2010) measured the relationship between energy consumption and economic growth in three SAARC countries with multi-frame work panel data. They incorporated real GDP, energy consumption, labor force and capital stock by using modern panel unit root technique, residual based panel cointegration and panel based error correction models. "
    [Show abstract] [Hide abstract]
    ABSTRACT: Energy consumption is a key factor in economic activity. To ascertain its role in economic growth, this study empirically investigates its role for Asian countries. Price index is also included in analysis as factor of economic growth. We examine and quantify this long run relationship for a sample of selected Asian countries with data on relevant variables for a large time dimension (1970 to 2012). Econometric precision is brought by using pooled mean group (PMG) besides other Pedroni, Kao and Westerlund panel cointegration tests. PMG being heterogeneous panels estimation technique allows the slope and short run parameters to vary across the countries. Structural breaks are also incorporated to observe the impact of shocks that leave permanent effect on national income. Results show the presence of long run relationship between energy consumption and national income. The positive contribution of energy consumption is quantified using Fully Modified OLS and dynamic OLS as well. Policy recommendations are made on the basis of empirical analysis.
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper empirically examines the dynamic causal relationships between electricity consumption and economic growth for the panel of south Asian countries using time series data from 1971 to 2007. Another purpose of this paper is to find the short-run and long-run elasticities of economic growth with respect to electricity consumption for this panel. The four panel unit root tests results support that both the variables are integrated of order 1. The Johansen Fisher panel conintegration test results support that there is a one cointegration vector. The Granger causality tests results support that existence of unidirectional causality from economic growth to electricity consumption in India, Nepal and Pakistan, and from electricity consumption to economic growth in Bangladesh. No causal relationship is found in Iran and Sri-Lanka. The panel Granger F-test results support that there is no evidence of short-run causal relationship between the variables but long-run unidirectional causal relationship from electricity consumption to economic growth is found for this panel. It is found that the long-run elasticity of economic growth with respect to electricity consumption (0.5451) is higher than short-run elasticity of 0.3813. This means that over times higher electricity consumption in South Asian countries gives rise to more economic growth.
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper examines the relationship between natural gas consumption and economic growth in Pakistan using a multivariate model by including capital and labor as the control variables for the periods of 1972-2009. The results of the ARDL bounds testing indicate the presence of cointegration among the variables. The estimated long-run impact of gas consumption (0.49) on economic growth is greater than other factor inputs suggesting that energy is a critical driver of production and growth in Pakistan. Furthermore, the results of causality test and variance decomposition analysis suggest a unidirectional causality running from natural gas consumption to economic growth. Gas being the primary source of energy in Pakistan, the implications of this study is that natural gas conservation policies could harm growth and, therefore, requires the policy makers to improve the energy supply efficiency as well as formulate appropriate policy to attract investment and establish public-private partnership initiatives.
Show more