Sectoral Growth and Energy Consumption in South and Southeast Asian Countries: Evidence from a Panel Data Approach

This study examines the dynamic relationship between energy consumption and the three major sectoral outputs (agricultural, manufacturing and service) in thirteen South and Southeast Asian countries using a panel data framework for the period 1971¨C2012. It undertakes panel cointegration analysis to investigate the long-run relationship between the variables. Also, the panel vector error correction model (PVECM) and impulse response functions (IRFs) are employed to examine the short- and long-run direction of causality and the effect of responses between energy consumption and the three sectoral outputs. The empirical results reveal that the long-run equilibrium relationship between energy consumption and the three sectoral outputs is positive and statistically significant, indicating the existence of long-run co-movement among the variables. The short- and long-run causality results support the existence of bidirectional causality between energy consumption and the three sectoral outputs except for the short-run causality between energy consumption and service sector output, which is unidirectional, running from service sector output to energy consumption. The IRFs show that all variables reach the equilibrium level within three to seven years from the initial shock.