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Electricity consumption, income, foreign direct investment, and population in Malaysia: New evidence from multivariate framework analysis

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  • Chor Foon Tang

Abstract

Purpose – This study attempts to re-investigate the electricity consumption function for Malaysia through the cointegration and causality analyses over the period 1970 to 2005. Design/methodology/approach – The study employed the bounds-testing procedure for cointegration to examine the potential long-run relationship, while an autoregressive distributed lag model is used to derive the short- and long-run coefficients. The Granger causality test is applied to determine the causality direction between electricity consumption and its determinants. Findings – New evidence is found in this study: first, electricity consumption, income, foreign direct investment, and population in Malaysia are cointegrated. Second, the influx of foreign direct investment and population growth are positively related to electricity consumption in Malaysia and the Granger causality evidence indicates that electricity consumption, income, and foreign direct investment are of bilateral causality. Originality/value – The estimated multivariate electricity consumption function for Malaysia implies that Malaysia is an energy-dependent country; thus energy-saving policies may have an inverse effect on current and also future economic development in Malaysia.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 36 (2009)
Issue (Month): 4 (September)
Pages: 371-382

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Handle: RePEc:eme:jespps:v:36:y:2009:i:4:p:371-382

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Keywords: Electricity industry; Energy consumption; International investments; Malaysia;

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Cited by:
  1. Mutascu, Mihai & Shahbaz, Muhammad & Tiwari, Aviral Kumar, 2011. "Revisiting the relationship between electricity consumption, capital and economic growth: Cointegration and causality analysis in Romania," MPRA Paper 29233, University Library of Munich, Germany.
  2. Sbia, Rashid & Shahbaz, Muhammad & Hamdi, Helmi, 2014. "A contribution of foreign direct investment, clean energy, trade openness, carbon emissions and economic growth to energy demand in UAE," Economic Modelling, Elsevier, vol. 36(C), pages 191-197.
  3. Tang, Chor Foon & Tan, Eu Chye, 2013. "Exploring the nexus of electricity consumption, economic growth, energy prices and technology innovation in Malaysia," Applied Energy, Elsevier, vol. 104(C), pages 297-305.
  4. Solarin, Sakiru Adebola & Shahbaz, Muhammad, 2013. "Trivariate causality between economic growth, urbanisation and electricity consumption in Angola: Cointegration and causality analysis," Energy Policy, Elsevier, vol. 60(C), pages 876-884.
  5. Tang, Chor Foon & Shahbaz, Muhammad, 2013. "Sectoral analysis of the causal relationship between electricity consumption and real output in Pakistan," Energy Policy, Elsevier, vol. 60(C), pages 885-891.
  6. Shahbaz, Muhammad & Ur Rehman, Ijaz & Zainudin, Rozaimah, 2013. "Macroeconomic Determinants of Stock Market Capitalization in Pakistan:Fresh Evidence from Cointegration with unknown Structural breaks," MPRA Paper 52490, University Library of Munich, Germany, revised 24 Dec 2013.
  7. Bento Cerdeira, João Paulo, 2012. "The role of foreign direct investment in the renewable electricity generation and economic growth nexus in Portugal: a cointegration and causality analysis," MPRA Paper 41533, University Library of Munich, Germany.
  8. Lean, Hooi Hooi & Smyth, Russell, 2010. "On the dynamics of aggregate output, electricity consumption and exports in Malaysia: Evidence from multivariate Granger causality tests," Applied Energy, Elsevier, vol. 87(6), pages 1963-1971, June.
  9. Omri, Anis & Kahouli, Bassem, 2014. "Causal relationships between energy consumption, foreign direct investment and economic growth: Fresh evidence from dynamic simultaneous-equations models," Energy Policy, Elsevier, vol. 67(C), pages 913-922.
  10. Muhammad, Shahbaz, 2011. "Electricity Consumption, Financial Development and Economic Growth Nexus: A Revisit Study of Their Causality in Pakistan," MPRA Paper 35588, University Library of Munich, Germany, revised 27 Dec 2011.
  11. Cerdeira Bento, João Paulo, 2012. "Cointegration Models Applied For Portugal’s Energy Consumption, Inward FDI and GDP Series (1980-2007)," MPRA Paper 41619, University Library of Munich, Germany.
  12. Chandran, V.G.R. & Tang, Chor Foon, 2013. "The impacts of transport energy consumption, foreign direct investment and income on CO2 emissions in ASEAN-5 economies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 24(C), pages 445-453.
  13. Apergis, Nicholas & Tang, Chor Foon, 2013. "Is the energy-led growth hypothesis valid? New evidence from a sample of 85 countries," Energy Economics, Elsevier, vol. 38(C), pages 24-31.
  14. Tang, Chor Foon & Shahbaz, Muhammad & Arouri, Mohamed, 2013. "Re-investigating the electricity consumption and economic growth nexus in Portugal," Energy Policy, Elsevier, vol. 62(C), pages 1515-1524.
  15. Shahbaz, Muhammad & Tang, Chor Foon & Shahbaz Shabbir, Muhammad, 2011. "Electricity consumption and economic growth nexus in Portugal using cointegration and causality approaches," Energy Policy, Elsevier, vol. 39(6), pages 3529-3536, June.
  16. Chor Foon Tang & Soo Y. Chua, 2012. "The savings-growth nexus for the Malaysian economy: a view through rolling sub-samples," Applied Economics, Taylor & Francis Journals, vol. 44(32), pages 4173-4185, November.
  17. Tang, Chor Foon & Shahbaz, Muhammad, 2011. "Revisiting the Electricity Consumption-Growth Nexus for Portugal: Evidence from a Multivariate Framework Analysis," MPRA Paper 28393, University Library of Munich, Germany.
  18. Raza, Syed Ali & Jawaid, Syed Tehseen & Afshan, Sahar, 2013. "Is Stock Market Sensitive to Foreign Capital Inflows and Economic Growth? Evidence from Pakistan," MPRA Paper 48399, University Library of Munich, Germany.
  19. João Paulo Bento, 2011. "Energy Savings via Foreign Direct Investment? - Empirical evidence from Portugal," Working Papers 2011/24, Maastricht School of Management.

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