Energy Consumption and Economic Growth in South Asian Countries: A Co-integrated Panel Analysis
This study examines causal link between energy use and economic growth for five South Asian countries over period 1971-2006. Panel cointegration, ECM and FMOLS are applied for short and long run estimates. In short run unidirectional causality from per capita GDP to per capita energy consumption is found, but not vice versa. In long run one percent increase in per capita energy consumption tend to decrease 0.13 percent per capita GDP. i.e. Energy use discourage economic growth. This short and long run relationship indicate energy shortage crisis in South Asia due to increased energy use coupled with insufficient energy supply. Beside this long run estimated coefficient of error term suggest that short term adjustment to equilibrium are driven by adjustment back to long run equilibrium. Moreover, per capita energy consumption is responsive to adjustment back to equilibrium and it takes 59 years approximately. It specifies long run feedback between both variables.
[1] Ikenberry, G.J. (1986). The irony of state strength:
Comparative responses to the oil shocks in the 1970s. International
Organization, 40 (1), 105-137.
[2] Time Magazine, 1979-02-05. http://www.time.com/time/
[3] Kraft, j., and Kraft, A. (1978). On the relationship between energy and
GNP. Journal of Energy and Development, 3, 401-403.
[4] Akarca, A.T., and Long, T.V. (1979). Energy and employment: a time
series analysis of the causal relationship. Resources and Energy, 5, 326-
331.
[5] Akarca, A.T., and Long, T.V. (1980). On the relationship between
energy and GNP: a re-examination. Journal of Energy and Development,
5, 326-331.
[6] Wolde-Rufael, Y. (2006). Electricity consumption and economic
growth; a time series experience for 17 African countries. Energy Policy,
34, 1106-1114.
[7] Masih, A. M. M., and Masih, R. (1996). Electricity consumption, real
income and temporal causality: results from a multi-country study based
on cointegration and error correction modeling techniques. Energy
Economics, 18, 165- 183.
[8] Jumbe, C. B. L. (2004). Cointegration and causality between electricity
consumption and GDP: empirical evidence from Malawi. Energy
Economics, 26, 61-68.
[9] Yu, S.H., and Choi, J.Y. (1985). The causal relationship between energy
and GNP: an international comparison. Journal of Energy and
Development, 10, 249- 272.
[10] Energy Information Administration (EIA), http://www.eia.doe.gov
[11] South Asian Regional Initiative for Energy (SARI/ENERGY),
http://www.sari.energy.org
[12] Yu, E.S.H., and Hwang, B-K. (1984). The relationshio between energy
and GNP: further results. Energy economics, 6(3), 186-190.
[13] Erol, U., and Yu, E.S.H. (1987). Time series analysis of the causal
relationship relationship between US energy and employment. Resources
of Energy, 9, 75-89.
[14] Aqeel, A., and Butt, M. (2001). The relationship between energy
consumption and economic growth in Pakistan. Asia-Pacific
Development Journal, 8(2), 101-110.
[15] Zahid, K. (2008). Energy-GDP relationship: a casual analysis for the
five countries of South Asia. Applied Econometrics and International
Development, 8(1), 167-180.
[16] Khan, M, A., and Qayyum, A. (2006). Dynamic modeling of energy and
growth in South Asia, Working paper. Pakistan Institute of Development
Economics.
[17] Asafu-Adjaye, J. (2000). The relationship between energy consumption,
energy prices and economic growth: time series evidence from Asian
developing countries. Energy Economics, 22, 615-625.
[18] Yoo, S.H. (2006). The causal relationship between electricity
consumption and economic growth in the ASEAN countries. Energy
Policy, 34 (18), 3573-3582.
[19] Tang, C.F. (2008). A re-examination of the relationship between
electricity consumption and economic growth in Malaysia. Energy
policy, 36, 3077-3085.
[20] Apergis, N., and Payne, J.E. (2009). CO2 emissions, energy usage and
output in centeral America. Energy Policy, 37, 3282-3286.
[21] World Bank. (2008). World Development Indicators [CD Rom 2009].
World Bank, Washington, D.C.
[22] Ghali, K. H., and El-sakka, M.I.T. (2004). Energy use and output growth
in Canada: a multivariate cointegration analysis. Energy Economics, 26,
225-238.
[23] Asteriou, D. (2006). Panel data econometrics. In, Applied econometrics:
a modern approach using Eviews and Microfit (1st ed, pp.367-377).
Palgrave Macmillan, New York.
[24] Phillips, P. (1992). Hyper-consistent estimation of a unit root in time
series regression. Cowles Foundation Discussion Papers, No. 1040.
[25] Maddala, G.S., and Wu. S. (1999). A comparative study of unit root tests
with panel data and a new simple test. Oxford Bulletin of Economics and
Statistics, 61, 631-652.
[26] Levin, A., Lin, C.F., and Chu, C.S. (2002). Unit root tests in panel data:
asymptotic and finite-sample properties. Journal of Econometrics, 108,
1- 24.
[27] Im, K. S., Pesaran, M. H., and Shin, Y. (2003). Testing for unit roots in
heterogeneous panels. Journal of Econometrics, 115, 53-74.
[28] Pedroni, P. (2004). Panel cointegration: asymptotic and finite sample
properties of pooled time series tests with an application to PPP
hypothesis: new results. Econometric Theory, 20(3), 597-627.
[29] Kao, C. (1999). Spurious regression and residual-based tests for
cointegration in panel data. Journal of Econometrics, 90 (1), 1-44.
[30] Pedroni, P. (2000). Fully modified OLS for heterogeneous cointegrated
panels, nonstationary panels, panel cointegration and dynamic panels.
Advances in Econometrics , 15, 93-130.
[31] Engle, R.F., and Granger, C.W.J. (1987). Cointegration and error
correction: representation, estimation, and testing. Econometrica, 55,
251-276.
[32] Nelson, C.R., and Plosser, C.I. (1982). Trends and random walks in
macroeconomic time series: some evidence and implications. Journal of
Monetary Economics, 10(2), 139-162.
[33] Lee, C.C. (2005). Energy consumption and GDP in developing
countries: a cointegrated panel analysis. Energy Economics, 27, 415-
427.
[34] Sadorsky, p. (2009). Renewable energy consumption and income in
emerging economies. Energy Policy, 37(10), 4021-4028.
[35] Sari, R., and Soytas, U. (2007). The growth of income and energy
consumption in six developing countries. Energy Policy, 35, 889-898.
[1] Ikenberry, G.J. (1986). The irony of state strength:
Comparative responses to the oil shocks in the 1970s. International
Organization, 40 (1), 105-137.
[2] Time Magazine, 1979-02-05. http://www.time.com/time/
[3] Kraft, j., and Kraft, A. (1978). On the relationship between energy and
GNP. Journal of Energy and Development, 3, 401-403.
[4] Akarca, A.T., and Long, T.V. (1979). Energy and employment: a time
series analysis of the causal relationship. Resources and Energy, 5, 326-
331.
[5] Akarca, A.T., and Long, T.V. (1980). On the relationship between
energy and GNP: a re-examination. Journal of Energy and Development,
5, 326-331.
[6] Wolde-Rufael, Y. (2006). Electricity consumption and economic
growth; a time series experience for 17 African countries. Energy Policy,
34, 1106-1114.
[7] Masih, A. M. M., and Masih, R. (1996). Electricity consumption, real
income and temporal causality: results from a multi-country study based
on cointegration and error correction modeling techniques. Energy
Economics, 18, 165- 183.
[8] Jumbe, C. B. L. (2004). Cointegration and causality between electricity
consumption and GDP: empirical evidence from Malawi. Energy
Economics, 26, 61-68.
[9] Yu, S.H., and Choi, J.Y. (1985). The causal relationship between energy
and GNP: an international comparison. Journal of Energy and
Development, 10, 249- 272.
[10] Energy Information Administration (EIA), http://www.eia.doe.gov
[11] South Asian Regional Initiative for Energy (SARI/ENERGY),
http://www.sari.energy.org
[12] Yu, E.S.H., and Hwang, B-K. (1984). The relationshio between energy
and GNP: further results. Energy economics, 6(3), 186-190.
[13] Erol, U., and Yu, E.S.H. (1987). Time series analysis of the causal
relationship relationship between US energy and employment. Resources
of Energy, 9, 75-89.
[14] Aqeel, A., and Butt, M. (2001). The relationship between energy
consumption and economic growth in Pakistan. Asia-Pacific
Development Journal, 8(2), 101-110.
[15] Zahid, K. (2008). Energy-GDP relationship: a casual analysis for the
five countries of South Asia. Applied Econometrics and International
Development, 8(1), 167-180.
[16] Khan, M, A., and Qayyum, A. (2006). Dynamic modeling of energy and
growth in South Asia, Working paper. Pakistan Institute of Development
Economics.
[17] Asafu-Adjaye, J. (2000). The relationship between energy consumption,
energy prices and economic growth: time series evidence from Asian
developing countries. Energy Economics, 22, 615-625.
[18] Yoo, S.H. (2006). The causal relationship between electricity
consumption and economic growth in the ASEAN countries. Energy
Policy, 34 (18), 3573-3582.
[19] Tang, C.F. (2008). A re-examination of the relationship between
electricity consumption and economic growth in Malaysia. Energy
policy, 36, 3077-3085.
[20] Apergis, N., and Payne, J.E. (2009). CO2 emissions, energy usage and
output in centeral America. Energy Policy, 37, 3282-3286.
[21] World Bank. (2008). World Development Indicators [CD Rom 2009].
World Bank, Washington, D.C.
[22] Ghali, K. H., and El-sakka, M.I.T. (2004). Energy use and output growth
in Canada: a multivariate cointegration analysis. Energy Economics, 26,
225-238.
[23] Asteriou, D. (2006). Panel data econometrics. In, Applied econometrics:
a modern approach using Eviews and Microfit (1st ed, pp.367-377).
Palgrave Macmillan, New York.
[24] Phillips, P. (1992). Hyper-consistent estimation of a unit root in time
series regression. Cowles Foundation Discussion Papers, No. 1040.
[25] Maddala, G.S., and Wu. S. (1999). A comparative study of unit root tests
with panel data and a new simple test. Oxford Bulletin of Economics and
Statistics, 61, 631-652.
[26] Levin, A., Lin, C.F., and Chu, C.S. (2002). Unit root tests in panel data:
asymptotic and finite-sample properties. Journal of Econometrics, 108,
1- 24.
[27] Im, K. S., Pesaran, M. H., and Shin, Y. (2003). Testing for unit roots in
heterogeneous panels. Journal of Econometrics, 115, 53-74.
[28] Pedroni, P. (2004). Panel cointegration: asymptotic and finite sample
properties of pooled time series tests with an application to PPP
hypothesis: new results. Econometric Theory, 20(3), 597-627.
[29] Kao, C. (1999). Spurious regression and residual-based tests for
cointegration in panel data. Journal of Econometrics, 90 (1), 1-44.
[30] Pedroni, P. (2000). Fully modified OLS for heterogeneous cointegrated
panels, nonstationary panels, panel cointegration and dynamic panels.
Advances in Econometrics , 15, 93-130.
[31] Engle, R.F., and Granger, C.W.J. (1987). Cointegration and error
correction: representation, estimation, and testing. Econometrica, 55,
251-276.
[32] Nelson, C.R., and Plosser, C.I. (1982). Trends and random walks in
macroeconomic time series: some evidence and implications. Journal of
Monetary Economics, 10(2), 139-162.
[33] Lee, C.C. (2005). Energy consumption and GDP in developing
countries: a cointegrated panel analysis. Energy Economics, 27, 415-
427.
[34] Sadorsky, p. (2009). Renewable energy consumption and income in
emerging economies. Energy Policy, 37(10), 4021-4028.
[35] Sari, R., and Soytas, U. (2007). The growth of income and energy
consumption in six developing countries. Energy Policy, 35, 889-898.
@article{"International Journal of Business, Human and Social Sciences:56959", author = "S. Noor and M. W. Siddiqi", title = "Energy Consumption and Economic Growth in South Asian Countries: A Co-integrated Panel Analysis", abstract = "This study examines causal link between energy use and economic growth for five South Asian countries over period 1971-2006. Panel cointegration, ECM and FMOLS are applied for short and long run estimates. In short run unidirectional causality from per capita GDP to per capita energy consumption is found, but not vice versa. In long run one percent increase in per capita energy consumption tend to decrease 0.13 percent per capita GDP. i.e. Energy use discourage economic growth. This short and long run relationship indicate energy shortage crisis in South Asia due to increased energy use coupled with insufficient energy supply. Beside this long run estimated coefficient of error term suggest that short term adjustment to equilibrium are driven by adjustment back to long run equilibrium. Moreover, per capita energy consumption is responsive to adjustment back to equilibrium and it takes 59 years approximately. It specifies long run feedback between both variables.
", keywords = "Energy consumption, Income, Panel co-integration,Causality.", volume = "4", number = "7", pages = "1711-6", }
