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Revisiting the Relationship between Coal Consumption and Economic Growth: Cointegration and Causality Analysis in Pakistan

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  • Muhammad SHAHBAZ
  • Smile DUBE

Abstract

The paper re-visits the relationship between coal consumption and economic growth by including other supporting variables such as capital use and labor participation rate in Pakistan over the 1972-2009 period. The paper adopts an augmented neoclassical production framework. In doing so, for the long run relationship between the variables, the ARDL bounds testing approach to cointegration is applied. The VECM Granger causality procedure is used to detect the direction of causality between coal consumption and economic growth while an innovative accounting approach is used to check the robustness of causality results. Empirical exercise confirms a long run relationship between the variables. The results suggest that coal consumption, capital use and the labor participation rate have positive impact on economic growth. Causality analysis indicates bidirectional causal relation between coal consumption and economic growth and results are robust through innovative accounting approach. This implies that energy (coal) conservation policies may retard economic growth that in turn lowers the demand of coal.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 12 (2012)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:12:y:2012:i:1_13

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Related research

Keywords: Coal Consumption; Economic Growth; Cointegration;

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  1. Apergis, Nicholas & Payne, James E., 2009. "Energy consumption and economic growth in Central America: Evidence from a panel cointegration and error correction model," Energy Economics, Elsevier, Elsevier, vol. 31(2), pages 211-216.
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Cited by:
  1. Muhammad Zeshan & Vaqar Ahmed, 2013. "Energy, environment and growth nexus in South Asia," Environment, Development and Sustainability, Springer, Springer, vol. 15(6), pages 1465-1475, December.
  2. Muhammad, Shahbaz & Lean, Hooi Hooi & Abdul, Farooq, 2012. "Natural Gas Consumption and Economic Growth in Pakistan," MPRA Paper 40959, University Library of Munich, Germany, revised 30 Aug 2012.
  3. Satti, Saqlain Latif & Hassan, Muhammad Shahid & Mahmood, Haider & Shahbaz, Muhammad, 2014. "Coal consumption: An alternate energy resource to fuel economic growth in Pakistan," Economic Modelling, Elsevier, vol. 36(C), pages 282-287.
  4. Sahbi Farhani & Muhammad Shahbaz & Mohammad Mafizur Rahman, 2014. "Natural gas consumption and economic growth in France: Evidence for the role of exports, capital and labor," Working Papers 2014-226, Department of Research, Ipag Business School.
  5. Shahbaz, Muhammad & Farhani, Sahbi & Rahman, Mohammad Mafizur, 2013. "Natural Gas Consumption and Economic Growth Nexus: The Role of Exports, Capital and Labor in France," MPRA Paper 50619, University Library of Munich, Germany, revised 12 Oct 2013.

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