In the present paper, an attempt is made to examine the causalrelationshipbetween the per capita consumption of coal, electricity, oil and total commercial energy and the per capita real gross domestic product (GDP), using a co-integration and vector error correction model. The increase in real GDP, among other things, indicates a higher demand for a large quantity of commercial energy such as coal, oil and electricity. This implies that low infrastructure development limits the usage of commercial energy, which may also hold back economicgrowth. Empirical findings reveal that there is a unidirectional causality running from coal, oil and commercial energyconsumption to per capita real GDP, whereas a unidirectional causality running from per capita real GDP to per capita electricity consumption is found. It is suggested that the input of per capita energyconsumption stimulates enhanced economicgrowth in Nepal.
This finding suggests a decoupling betweenenergyconsumption and economic activity providing support to the argument that after 1970, the relationshipbetween the two variables could have changed. The hypothesis seems to be stronger for most countries while for the cases of Spain and Portugal a coupling between the two variables could still hold even after 1970s given that the two variables continue to rise simultaneously. In fact, in Figure 3 the energy intensities (the ratio of energyconsumption to GDP) of all countries after 1970 are presented and it can clearly be seen that while for the majority of them energy intensity declines, suggesting a decoupling between the two variables in the long run, for Spain and more clearly for Portugal the ratio remains relatively stable at the same levels, after 1970. This could be attributed to the relatively latter industrialization that the countries had compared to the more developed economies in northern Europe. In fact, the study by Henriques (2011) on the Portuguese economy has shown that two key outcomes of the later industrialization of the country could be the main reasons for the existing coupled relationship of energyconsumption and economicgrowth after 1970. The first is related with the “subsectoral structural change” that occurred in the country which was relatively different than that of more advanced economies in Europe favoring the immergence of energy intensive industries like chemicals and pulp. However the second and more “concerning” factor, has been the fact the country’s industry after the 1970s was focused more on a low value added production structure. In this sense, “in an time where knowledge was the important factor of production, producing low value- added products could … compromise the decoupling of energy from economicgrowth” (Henriques, 2011: 256).
This study examined the causalrelationshipbetween electricity consumption and economicgrowth in Uganda during the period 1960–2014. Inasmuch as there have been similar studies done on the African continent on this relationship, none has been done in Uganda. The objectives of the study were threefold: 1) to estimate the short--run and long--run relationshipbetween electricity consumption and economicgrowth in Uganda; 2) to examine the direction of the causalrelationship; and 3) to propose policies to guide future decision making of government. To achieve these objectives, the study adopted the Auto Regressive Distributed Lag bounds approach in analysing the level of relationship. In addition, the study used the pairwise Granger Causality testing procedures to determine the direction of causation between the study variables. Results from the study indicated that there is a valid long-run level relationshipbetween electricity consumption and economicgrowth. In addition, the pairwise Granger causality tests indicated that the relationship is unidirectional, running from electricity consumption to economicgrowth. Overall, the study found that energyconsumption spurs economicgrowth in Uganda. The government should fast-track and consolidate interventions in electricity generation with the view of sustaining the long-run electricity demand and consumption in Uganda. In the short run, investments to improve energy efficiency and reduce losses should make more electricity available for consumption.
This study aims to examine the short-run and long-run relationshipbetweeneconomicgrowth, energyconsumption, financial development, capital formation and population by using data set of Malaysia for the period 1971–2014. An emerging economy like Malaysia has high energyconsumption which is intensified by its growing population. Economicgrowth and energyconsumption in Malaysia have been rising over the past several years. The motivation to this study is related to four policy objectives of Malaysia; economicgrowth, financial development, energy conservation and reduction on pollution. The auto regressive distributed lag (ARDL) bounds testing approach to test the long run relationship among the variables, while short run dynamics were investigated using the Vector Error Correction Model (VECM). Variance decomposition (VDC) technique was used to provide Granger causalrelationshipbetween the variables.The findings suggest that energyconsumption is influenced by economicgrowth and financial development, both in the short and the long run. The population–energyrelationship however only holds in the long run. The results have important policy implications for balancing economicgrowth vis-à-vis energyconsumption for Malaysia, and other emerging nations to explore new and alternative sources of energy to meet the rising demand of energy to sustain economicgrowth.
The impact of transport and communication infrastructure on economicgrowth is a topic that has attracted considerable attention from researchers, academicians and practitioners in the existing economic literature (Zhou et al. 2002, Esfahani and Ramirez 2003, Pradhan and Bagchi 2013, Kim et al. 2017, Jin and Rafferty 2017). For example, Fernald (1999) affirmed that there is a strong link between investment in transport infrastructure and economic productivity. With data for 29 US industries, the empirical evidence shows that the decline in productivity registered in the United States after 1973 was more important in high-intensity vehicle industries. The results also confirm that these industries benefited disproportionately from investments in road networks. In OECD countries, Roller and Waverman (2001) tested the impact of telecommunications infrastructure on economicgrowth by applying a micromodel for telecommunication investment with a macro-production function. Their empirical analysis confirmed the presence of a positive causalrelationshipbetween telecommunication infrastructure and economic development, i.e., a feedback effect. For countries in Latin America (Guatemala, Honduras, Nicaragua), Escribano and Guasch (2005) indicated that access to the internet increases the productivity of workers from 11% to 15%. Yeaple and Golub (2007) examined the impact of three types of infrastructure (roads, telecommunications, and electricity) on total factor productivity for 18 countries and 10 manufacturing industries over the period of 1979-1997 period. They apply the three-stage least squares (3SLS) estimation strategy and show that roads have the most important impact on productivity in different industries. These results help explain patterns of comparative advantage and international specialization. In addition, Mu and Van de Wall (2007) showed that the extension of rural road networks in Vietnam increases job opportunities by 11% for unskilled workers.
The final step in this study is to verify the direction of causality betweenenergyconsumption (Enuse_ pc) and economicgrowth (GDP_pc) using the Toda and Yamamoto causality test. The empirical results of Granger Causality test based on methodology is estimated through MWALD test and reported in Table 7. According to Toda Yamamota causality test “Enuse_pc does not Granger Cause GDP_pc” null hypothesis rejected and also “GDP_pc does not Granger Cause Enuse_pc” null hypothesis rejected. Consequently, there is observed bi-directional causality betweenenergyconsumption and economicgrowth. Our finding of bidirectional causality is the same with the findings of Apergis and Payne (2009) and Senturk and Sataf (2015) and differs that of Bildirici and Kayıkçı (2012) and Tang and Abosedra (2014), who found unidirectional causality running from energyconsumption to economicgrowth and differs Kalyoncu et al. (2013) result of no causalrelationship and also, that of Hasanov et al. (2017) finding with causality running from gdp to energy consumption.This may be because of using different methods and periods.
This study has explored the causalrelationshipbetweenenergyconsumption and economicgrowth – using the time-series data from Ethiopia during the period from 1971 to 2013. The study is fundamentally different from the majority of previous studies on energy-growth causality nexus in that it has used a multivariate framework – with financial development, investment and trade openness as the intermittent variables. The study has also utilised the ARDL bounds testing approach to co-integration and the ECM-based Granger-causality tests to examine this linkage. The results of this study show that in Ethiopia, there is a distinct unidirectional causal flow from economicgrowth to energyconsumption. These results apply, irrespective of whether the estimation is done in the short run or in the long run. The study, therefore, recommends that in Ethiopia, policy makers should consider expanding their energy-mix options, in order to cope with the future demand arising from increased economicgrowth.
In this paper we attempted to find the direction of the causalrelationshipbetweenenergyconsumption and economic activity in Pakistan. More specifically we investigated the causalrelationshipbetweengrowth in energyconsumption and growth in GDP while causality between other variables also. The methodology was based on the Granger causality test which has been found appropriate by using the unit root test and finding out that only GDP growth is stationary at level while all the other three variables are non stationary at level and can be made stationary at first level. The estimated results infer that all variables are not granger causing each other at 5 percent level of significance while at 10 percent level of significance electric power consumption is granger causing GDP growth. The paper has important policy implications. Since Pakistan pays high oil import bill, petroleum imports were $1.53 billion in 1999/00 and in the preceding year $1.57 billion. In 2000-01 petroleum imports may be close to $2.5 billion or around 25 percent of total imports (Dawn 18-23 April 2000). Therefore, using oil more efficiently and substituting gas for oil wherever possible could be a good policy measure. The implications of the present study suggest that an energy conservation policy regarding petroleum consumption would not lead to any adverse side-effects on economicgrowth in Pakistan, whereas energygrowth policy in the case of gas and electricity consumption should be adopted in such a way that, growth in these sectors stimulates economicgrowth.
We use annual energyconsumption, EC hereafter and GDP per capita data in this study. EC is kg of oil equivalent and GDP data with (LCU) constant. The data are sourced from World Development Indicators (2012). These countries are first on the platform of low income countries and from among them, four African countries are chosen which include Nigeria, Benin, Kenya and Ghana and four non-African (Asian) countries which include Bangladesh, Pakistan, India and Nepal. A Period of 1975- 2010 was considered for the purpose of this study. All variables are employed with their natural logarithms form to reduce or forestall heteroscedasticity. To investigate the relationship and causality issue, panel unit root analysis, panel cointegration analysis, panel causality analysis, panel fully modified ordinary least square (FMOLS) and panel dynamic ordinary least square (DOL) estimates are employed in this study.
The question of whether or not energy conservation policies affect economic activity is of great interest in the international debate on global warming and the reduction of greenhouse gas emis- sions. Although the causalrelationshipbetweenenergyconsumption and economicgrowth has been widely studied, no consensus regarding this so-called energyconsumption-growth nexus has yet been reached. The direction of causality is highly relevant for policy makers. For instance, if causality runs from energyconsumption to economicgrowth, energy conservation policies that have the aim of reducing energyconsumption may have a negative impact on an economy’s growth. The liter- ature proposes four different hypotheses regarding the possible outcomes of causality Apergis and Payne (2009a,b). 1 The growth hypothesis suggests that energyconsumption is a crucial component in growth, directly or indirectly as a complement to capital and labour as input factors of production. Hence, a decrease in energyconsumption causes a decrease in real GDP. In this case, the economy is called ‘energy dependent’ and energy conservation policies may be implemented with adverse e ff ects on real GDP. By contrast, the conservation hypothesis claims that policies directed towards lower en- ergy consumption may have little or no adverse impact on real GDP. This hypothesis is based on a uni-directional causalrelationship running from real GDP to energyconsumption. Bi-directional causality corresponds with the feedback hypothesis, which argues that energyconsumption and real GDP affect each other simultaneously. In this case, policy makers should take into account the feed- back e ff ect of real GDP on energyconsumption by implementing regulations to reduce energy use. Additionally, economicgrowth should be decoupled from energyconsumption to avoid a negative impact on economic development resulting from a reduction of energy use. A shift from less effi- cient energy sources to more e ffi cient and less polluting options may establish a stimulus rather than an obstacle to economicgrowth (Costantini and Martini, 2010). Finally, the neutrality hypothesis indicates that reducing energyconsumption does not affect economicgrowth or vice versa. Hence, energy conservation policies would not have any impact on real GDP.
nent in growth, directly or indirectly as a complement to capital and labour as input factors of production. Hence, a decrease in energyconsumption causes a decrease in real GDP. In this case, the economy is called ‘energy dependent’ and energy conservation policies may be implemented with adverse e ﬀ ects on real GDP. By contrast, the conservation hypothesis claims that policies directed towards lower energyconsumption may have little or no ad- verse impact on real GDP. This hypothesis is based on a uni-directional causalrelationship running from real GDP to energyconsumption. Bi-directional causality corresponds with the feedback hypothesis, which argues that energyconsumption and real GDP a ﬀ ect each other simultaneously. In this case, policy makers should take into account the feedback e ﬀ ect of real GDP on energyconsumption by implementing regulations to reduce energy use. Additionally, economicgrowth should be decoupled from energyconsumption to avoid a negative impact on economic development resulting from a reduction of energy use. A shift from less e ﬃ cient energy sources to more e ﬃ cient and less polluting options may establish a stimulus rather than an obstacle to economicgrowth (Costantini and Mar- tini, 2010). Finally, the neutrality hypothesis indicates that reducing energyconsumption does not a ﬀ ect economicgrowth or vice versa. Hence, energy conservation policies would not have any impact on real GDP.
Energy can be divided into two categories: renewable energy and non-renewable energy. The need to reduce greenhouse gas in the environment can lead to an increase in renewable energy, in order to let the use of fossil energy decline. Another issue is that to maintain sustainable growth, the need for so-called ‘green’ energy is higher than for lower growth countries (Maji & Sulaiman, 2019). Decoupling energyconsumption from economicgrowth is necessary to increase energy efficiency (Moreau & Vuille, 2018). By doing so, the relationship of energy use on growth needs to attenuate. Decreasing energyconsumption is one part of the necessary plan to reduce emissions and reducing our impact on climate change (Friedlander, 2009). However, Shahbaz et al. (2017) conclude from previous research that one causalrelationshipbetweeneconomicgrowth and energyconsumption has not been defined.
has scrutinizes the linkage betweenenergyconsumption and output, suggesting that en- ergy consumption and output may be jointly determined and the direction of causality between these two variables needs to be tested. Following the seminal work of Kraft and Kraft (1978), several others including Masih and Masih (1997), Yang (2000), Wolde- Rufael (2009), Apergis and Payne (2009) and Ozturk et al. (2010) have tested the energyconsumption and economicgrowth nexus with a variety of techniques and for different panel of countries. Looking at the region of Gulf Cooporation Council (GCC), Al-Iriani (2006) investigates the causality relationshipbetween gross domestic product (GDP) and energyconsumption in the six countries of the Gulf Cooperation Council (GCC). Re- cently developed panel cointegration and causality techniques are used to uncover the direction of energyŰGDP causality in the GCC. Empirical results indicate a unidirec- tional causality running from GDP to energyconsumption. Evidence shows no support for the hypothesis that energyconsumption is the source of GDP growth in the GCC countries. Such results suggest that energy conservation policies may be adopted with- out much concern about their adverse effects on the growth of GCC economies. In the same context context, Hamdi et al. (2014) explores the relationshipbetween electricity consumption, foreign direct investment, capital and economicgrowth in the case of the Kingdom of Bahrain. The Cobb-Douglas production is used over the period of 1980 - 2010. Using autoregressive distributed lag (ARDL), a cointegration relationship has been detected among the series. It is found that electricity consumption, foreign direct invest- ment and capital add in economicgrowth. However, empirical works do not provide any precise answer, and there is still no consensus among economists whether there is a causalrelationship or not and if it exists, there is no clear-cut answer about the direction of this causation (Ozturk, 2010). The contradictory results may occur due to the differences in data sets, characteristics of the investigated countries, variables that are included in the studies, and the diversification in using econometric methodologies (Ozturk, 2010).
A multi-country study was conducted by Vidyarthi (2014) to investigate the relationshipbetweenenergyconsumption, carbon emissions and economicgrowth for 5 South Asian countries: Bangladesh, India, Pakistan, Nepal and Sri Lanka. The study used Pedroni’s co -integration test to determine the long term relationship among the variables and panel VECM Granger-causality to find the direction of causality between the variables. In using data for the period between 1972 and 2009, the study found that there exists a long term relationshipbetweenenergyconsumption, carbon emissions and economicgrowth in all these countries. The VECM Granger-causality suggested bidirectional causality betweenenergyconsumption and economicgrowth, a unidirectional causality flowing from carbon emissions to economicgrowth and energyconsumption in the long term. The short term results identified a unidirectional causality flowing from energyconsumption to carbon emissions.
Recently, the relationshipbetweenenergyconsumption and economicgrowth has been extensively investigated in a non-stationary setting by using a Vector Error Correction Model (VECM) to test for Granger causality (Cheng and Lai 1997, Stern 2000, Narayan and Singh 2007, Ghosh 2009). For example, Cheng and Lai (1997) confirm the presence of a unidirectional Granger causality running from economicgrowth to energyconsumption for Taiwan in the period from 1955 to 1993. In a similar study, Dhungel (2008) found unidirectional causality running from per capita energyconsumption using Granger causality test to determine the relationshipbetweenenergyconsumption and economicgrowth in Nepal during 1980-2004. The same causalrelationship is obtained by Narayan and Singh (2007) when applying a production function, in which they incorporate the labor factor as an additional component of the relationship on Fiji for the period from 1971 to 2002. Thure Traber (2008) expressed relationshipenergy and economicgrowth using Granger Causality results asserted that energy demand is likely to increase as long as we experience economicgrowth.
The availability of required power is a parameter of economicgrowth and economicgrowth leads to growth in demand for power. Although there has been an immense consensus that power is the software of economicgrowth, the causalrelationship and a precise economic link between per capita energyconsumption and economicgrowth at an individual country level have been scant (Bhaskar, 2013). This relationship has gained significant importance, as it is mandatory to know the same to frame relevant policies at the aggregate level. Further, studies on causal relationships between the electricity consumption and economicgrowth for long-period data of India are limited. The growth, conservative, feedback, and neutrality are the four major hypotheses to know the direction of a causalrelationshipbetweeneconomicgrowth and energyconsumption. The growth hypothesis exists when electricity consumption affects economicgrowth (Unidirectional) and the conservative hypothesis is vice versa. When both electricity consumption and economicgrowth affect each other then there is a feedback hypothesis (Bidirectional) but if both are independent it becomes neutrality hypothesis (Independent) (Singh & Mann, 2020). In the view of the importance of energyconsumption and economicgrowth, the aim of the present study is to examine whether the direction of the relationshipbetween per capita electricity consumption and per capita GDP is unidirectional, bidirectional or independent, which is so far lacking in the available scientific literature.
ISSN : 2351-8014 Vol. 4 No. 2, Jul. 2014 101 Life insurance companies play an increasingly important role within the financial sector. While during the period 1980-85 total assets of life insurance companies constituted only 11% of GDP for a sample of 13 countries, for which data were available, they constituted 28% for the period 1995-97 in the same countries. This increased importance was also reflected in the business volume of life insurers. Whereas life insurance penetration – the ratio of premium volume to GDP – was at 1.2% during the period 1961-65, it reached 4.2% in the period 1996-2000 for a sample of 19 countries, for which data were available (Beck and Webb, 2002). While this increased importance of life insurance both as provider of financial services and of investment funds on the capital markets is especially pronounced for developed countries, many developing countries still experience very low levels of life insurance consumption, which affects the contribution of life insurance business to economicgrowth. Beck and Webb (2002) however, stated that even within the group of developing countries, there are striking differences. While South Africa’s penetration ratio was 12.7% over the period 1996-2000, Syria’s was less than 0.01%. Given the large variation in the use of life insurance across countries, the question of the causes of this variation and therefore the effect of life assurance business on economicgrowth arises.
Second, were the running costs for steam engines lower than water since a cost advantage could have tipped the British industrialists’ hand in favor of fossil fuel-powered technology? To answer this question a cost comparison between water and fossil fuel-based energy production is required. Both water wheels and steam engines required significant capital expenditure. In the case of water wheels, the wheel had to be constructed and placed in a “wheel-house.” At the same time, a system of conduits had to be constructed to channel water to the wheel along with a dam for storing water. In the case of steam engines, metals like brass, copper and iron were required for constructing the pipes and the boiler. This process called for significant expenditure in the shape of specialized paraphernalia and skilled labor. However, in terms of day-to-day running costs, water wheels were cheaper per horsepower generated as once the lease to a certain stream had been acquired, marginal costs associated with running a water wheel were essentially negligible (Malm, 2013). In the case of steam engines, marginal costs were significant as coal had to be continually purchased and transported to the factories. Again, what this points out is that additional sources of water power could have been developed relatively cheaply and that there is no obvious business case for the fossil fuel turn in British industrial production.
Some authors try to deal with both non-stationarity and non-linearity in the co-integrating modeling strategy, since the mid-1990s. This extended section of co-integration research may be described as the primacy of three regime switch- ing models. The first one is the threshold error correction model developed by . The Markov-switching error correction model of  is the second regime switching model. The last model is the smooth transition errorcorrectionmodel developed by . The development of this literature reﬂects a general consider- ation that the assumption of linear adjustment may be excessively restrictive in a wide range of economically interesting situations. However, the majority of these studies are built on another overly restrictive assumption that the long-run relationship may be represented as a symmetric linear combination of non-sta- tionary stochastic regressors.
This paper investigates the relationshipbetweenenergyconsumption and economicgrowth of Pakistan. A time series data has been used for the period of 1973-2006. GDP is taken as dependent variable and energyconsumption as independent variable. Augmented Dicky Fuller test has been used to check the stationary of the variables and both variables found stationary at level. The results of Granger causality test show uni- directional causality running from GDP to energyconsumption. The results of ordinary least squares test show positive relation between GDP and energyconsumption in Pakistan. One percent increase in energyconsumption will raise GDP by 1.23%. Diagnostic tests confirm that residuals are normally distributed, coefficients are stable and there is no ARCH effect. Pakistan economy is energy dependent. Shortage of energy means lower the economicgrowth of Pakistan. We should utilize our own sources to meet the needs of energy like by constructing biogas plants in villages and solar energy is also alternative source. This can reduce the dependency on foreign sources.