IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v13y2020i4p837-d320700.html
   My bibliography  Save this article

Causality Relationship Between Electricity Supply and Economic Growth: Evidence from Pakistan

Author

Listed:
  • Anam Azam

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China)

  • Muhammad Rafiq

    (Department of Electrical Engineering, University of Engineering and Technology, Taxila 47050, Pakistan)

  • Muhammad Shafique

    (Department of Architecture and Civil Engineering, City University of Hong Kong, Hong Kong 999077, China)

  • Muhammad Ateeq

    (Department of Mechanical Engineering, COMSATS University Islamabad, Sahiwal Campus, Sahiwal 57000, Pakistan)

  • Jiahai Yuan

    (School of Economics and Management, North China Electric Power University, Beijing 102206, China
    Beijing Key Laboratory of New Energy and Low-Carbon Development, North China Electric Power University, Beijing 102206, China)

Abstract

The long-term anticipation of electricity supply (ELS) and demand has supposed substantial prominence in the elementary investigation to offer sustainable resolutions to electricity matters. In this editorial, an outline of the organization of the electricity segment of Pakistan and analysis of historical supply and demand statistics, an up-to-date position of the contrary set of energy plans is presented. The intention of this analysis is to explore the Granger causality relationship between electricity supply and economic growth (EG) by using a multivariate context with time series statistics covering 1990 to 2015 in Pakistan. Augmented dickey-fuller (ADF) and Philips-Perron (PP) unit root tests indicate that variables are non-stationary and integrated in a similar order (1). Our findings also reveal that variables economic growths (GDP), electricity supply (ELS), investment (INV), and export (EX) are co-integrated. The study also finds the Granger causality runs from EG to ELS deprived of any feedback effect. Therefore, the policy implications from our findings indicate that electricity preservation strategies may be implemented without any economic adverse impacts.

Suggested Citation

  • Anam Azam & Muhammad Rafiq & Muhammad Shafique & Muhammad Ateeq & Jiahai Yuan, 2020. "Causality Relationship Between Electricity Supply and Economic Growth: Evidence from Pakistan," Energies, MDPI, vol. 13(4), pages 1-20, February.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:4:p:837-:d:320700
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/13/4/837/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/13/4/837/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wolde-Rufael, Yemane, 2009. "Energy consumption and economic growth: The experience of African countries revisited," Energy Economics, Elsevier, vol. 31(2), pages 217-224.
    2. Daniel Ştefan Armeanu & Ştefan Cristian Gherghina & George Pasmangiu, 2019. "Exploring the Causal Nexus between Energy Consumption, Environmental Pollution and Economic Growth: Empirical Evidence from Central and Eastern Europe," Energies, MDPI, vol. 12(19), pages 1-27, September.
    3. Olexandr Yemelyanov & Anastasiya Symak & Tetyana Petrushka & Olena Zahoretska & Myroslava Kusiy & Roman Lesyk & Lilia Lesyk, 2019. "Changes in Energy Consumption, Economic Growth and Aspirations for Energy Independence: Sectoral Analysis of Uses of Natural Gas in Ukrainian Economy," Energies, MDPI, vol. 12(24), pages 1-34, December.
    4. Abbas Mardani & Dalia Streimikiene & Mehrbakhsh Nilashi & Daniel Arias Aranda & Nanthakumar Loganathan & Ahmad Jusoh, 2018. "Energy Consumption, Economic Growth, and CO 2 Emissions in G20 Countries: Application of Adaptive Neuro-Fuzzy Inference System," Energies, MDPI, vol. 11(10), pages 1-15, October.
    5. Venus Khim-Sen Liew, 2004. "Which Lag Length Selection Criteria Should We Employ?," Economics Bulletin, AccessEcon, vol. 3(33), pages 1-9.
    6. Chen, Sheng-Tung & Kuo, Hsiao-I & Chen, Chi-Chung, 2007. "The relationship between GDP and electricity consumption in 10 Asian countries," Energy Policy, Elsevier, vol. 35(4), pages 2611-2621, April.
    7. Shahbaz, Muhammad & Lean, Hooi Hooi, 2012. "The dynamics of electricity consumption and economic growth: A revisit study of their causality in Pakistan," Energy, Elsevier, vol. 39(1), pages 146-153.
    8. Jamil, Faisal & Ahmad, Eatzaz, 2010. "The relationship between electricity consumption, electricity prices and GDP in Pakistan," Energy Policy, Elsevier, vol. 38(10), pages 6016-6025, October.
    9. Inglesi-Lotz, R. & Blignaut, J.N., 2012. "Electricity intensities of the OECD and South Africa: A comparison," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 4491-4499.
    10. Kravis, Irving B, 1970. "Trade as a Handmaiden of Growth: Similarities between the Nineteenth and Twentieth Centuries," Economic Journal, Royal Economic Society, vol. 80(323), pages 850-872, December.
    11. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    12. Sadeghi, Mehdi & Mirshojaeian Hosseini, Hossein, 2006. "Energy supply planning in Iran by using fuzzy linear programming approach (regarding uncertainties of investment costs)," Energy Policy, Elsevier, vol. 34(9), pages 993-1003, June.
    13. Loizides, John & Vamvoukas, George, 2005. "Government Expenditure and Economic Growth: Evidence from Trivariate Causality Testing," Journal of Applied Economics, Universidad del CEMA, vol. 8(1), pages 1-28, May.
    14. Yoo, Seung-Hoon & Kim, Yeonbae, 2006. "Electricity generation and economic growth in Indonesia," Energy, Elsevier, vol. 31(14), pages 2890-2899.
    15. Tang, Chor Foon, 2008. "A re-examination of the relationship between electricity consumption and economic growth in Malaysia," Energy Policy, Elsevier, vol. 36(8), pages 3067-3075, August.
    16. Zaman, Khalid & Khan, Muhammad Mushtaq & Ahmad, Mehboob & Khilji, Bashir Ahmad, 2012. "The relationship between agricultural technologies and carbon emissions in Pakistan: Peril and promise," Economic Modelling, Elsevier, vol. 29(5), pages 1632-1639.
    17. Ghosh, Sajal, 2002. "Electricity consumption and economic growth in India," Energy Policy, Elsevier, vol. 30(2), pages 125-129, January.
    18. Brown, Stephen P. A. & Yucel, Mine K., 2002. "Energy prices and aggregate economic activity: an interpretative survey," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(2), pages 193-208.
    19. Kessides, Ioannis N., 2013. "Chaos in power: Pakistan's electricity crisis," Energy Policy, Elsevier, vol. 55(C), pages 271-285.
    20. Masih, Abul M. M. & Masih, Rumi, 1997. "On the temporal causal relationship between energy consumption, real income, and prices: Some new evidence from Asian-energy dependent NICs Based on a multivariate cointegration/vector error-correctio," Journal of Policy Modeling, Elsevier, vol. 19(4), pages 417-440, August.
    21. Benjamin S. Cheng, 1999. "Causality Between Energy Consumption and Economic Growth in India: An Application of Cointegration and Error-Correction Modeling," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 34(1), pages 39-49, January.
    22. Alexander Bass, 2018. "Does Electricity Supply Matter for Economic Growth in Russia: A Vector Error Correction Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 8(5), pages 313-318.
    23. Tsangyao Chang & Wenshwo Fang & Li-Fang Wen, 2001. "Energy consumption, employment, output, and temporal causality: evidence from Taiwan based on cointegration and error-correction modelling techniques," Applied Economics, Taylor & Francis Journals, vol. 33(8), pages 1045-1056.
    24. Mishra, Vinod & Smyth, Russell & Sharma, Susan, 2009. "The energy-GDP nexus: Evidence from a panel of Pacific Island countries," Resource and Energy Economics, Elsevier, vol. 31(3), pages 210-220, August.
    25. Ang, James B., 2008. "Economic development, pollutant emissions and energy consumption in Malaysia," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 271-278.
    26. Raúl Arango-Miranda & Robert Hausler & Rabindranarth Romero-Lopez & Mathias Glaus & Sara P. Ibarra-Zavaleta, 2018. "Carbon Dioxide Emissions, Energy Consumption and Economic Growth: A Comparative Empirical Study of Selected Developed and Developing Countries. “The Role of Exergy”," Energies, MDPI, vol. 11(10), pages 1-16, October.
    27. Lutkepohl, Helmut, 1982. "Non-causality due to omitted variables," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 367-378, August.
    28. Stern, David I., 1993. "Energy and economic growth in the USA : A multivariate approach," Energy Economics, Elsevier, vol. 15(2), pages 137-150, April.
    29. Narayan, Paresh Kumar & Smyth, Russell, 2005. "Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests," Energy Policy, Elsevier, vol. 33(9), pages 1109-1116, June.
    30. Zaman, Khalid & Khan, Muhammad Mushtaq & Ahmad, Mehboob & Rustam, Rabiah, 2012. "The relationship between agricultural technology and energy demand in Pakistan," Energy Policy, Elsevier, vol. 44(C), pages 268-279.
    31. Stern, David I., 2000. "A multivariate cointegration analysis of the role of energy in the US macroeconomy," Energy Economics, Elsevier, vol. 22(2), pages 267-283, April.
    32. Ghosh, Sajal, 2009. "Electricity supply, employment and real GDP in India: evidence from cointegration and Granger-causality tests," Energy Policy, Elsevier, vol. 37(8), pages 2926-2929, August.
    33. Mun Mun Ahmed & Koji Shimada, 2019. "The Effect of Renewable Energy Consumption on Sustainable Economic Development: Evidence from Emerging and Developing Economies," Energies, MDPI, vol. 12(15), pages 1-15, July.
    34. Chandran, V.G.R. & Sharma, Susan & Madhavan, Karunagaran, 2010. "Electricity consumption-growth nexus: The case of Malaysia," Energy Policy, Elsevier, vol. 38(1), pages 606-612, January.
    35. Narayan, Paresh Kumar & Smyth, Russell, 2009. "Multivariate granger causality between electricity consumption, exports and GDP: Evidence from a panel of Middle Eastern countries," Energy Policy, Elsevier, vol. 37(1), pages 229-236, January.
    36. Ferguson, Ross & Wilkinson, William & Hill, Robert, 2000. "Electricity use and economic development," Energy Policy, Elsevier, vol. 28(13), pages 923-934, November.
    37. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    38. Jung, Woo S. & Marshall, Peyton J., 1985. "Exports, growth and causality in developing countries," Journal of Development Economics, Elsevier, vol. 18(1), pages 1-12.
    39. Sahir, Mukhtar H. & Qureshi, Arshad H., 2008. "Assessment of new and renewable energy resources potential and identification of barriers to their significant utilization in Pakistan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 12(1), pages 290-298, January.
    40. Huiru Zhao & Haoran Zhao & Xiaoyu Han & Zhonghua He & Sen Guo, 2016. "Economic Growth, Electricity Consumption, Labor Force and Capital Input: A More Comprehensive Analysis on North China Using Panel Data," Energies, MDPI, vol. 9(11), pages 1-21, October.
    41. Yoo, S.-H., 2006. "The causal relationship between electricity consumption and economic growth in the ASEAN countries," Energy Policy, Elsevier, vol. 34(18), pages 3573-3582, December.
    42. Muhammad Haseeb & Sebastian Kot & Hafezali Iqbal Hussain & Kittisak Jermsittiparsert, 2019. "Impact of Economic Growth, Environmental Pollution, and Energy Consumption on Health Expenditure and R&D Expenditure of ASEAN Countries," Energies, MDPI, vol. 12(19), pages 1-21, September.
    43. Xu Liu & Jiang Lin & Junfeng Hu & Hongyou Lu & Jiaru Cai, 2019. "Economic Transition, Technology Change, and Energy Consumption in China: A Provincial-Level Analysis," Energies, MDPI, vol. 12(13), pages 1-16, July.
    44. 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.
    45. Hlalefang Khobai & Sanderson Abel & Pierre Le Roux, 2016. "Co-integration between Electricity Supply and Economic Growth in South Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 6(3), pages 637-645.
    46. Hlalefang Khobai & Sanderson Abel & Pierre Le Roux, 2016. "An Investigation into the Electricity Supply and Economic Growth Nexus for South Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 6(4), pages 701-705.
    47. Yi Hu & Dongmei Guo & Mingxi Wang & Xi Zhang & Shouyang Wang, 2015. "The Relationship between Energy Consumption and Economic Growth: Evidence from China’s Industrial Sectors," Energies, MDPI, vol. 8(9), pages 1-15, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ilyas, Rubina & Hussain, Khadim & Ullah, Mehreen Zaid & Xue, Jianhong, 2022. "Distributional impact of phasing out residential electricity subsidies on household welfare," Energy Policy, Elsevier, vol. 163(C).
    2. Larissa M. Batrancea & Horia Tulai, 2022. "Thriving or Surviving in the Energy Industry: Lessons on Energy Production from the European Economies," Energies, MDPI, vol. 15(22), pages 1-16, November.
    3. Iftikhar A. Shahid & Kafait Ullah & Atif Naveed Khan & Muhammad Imran Ahmed & Muhammad Dawood & Clark A. Miller & Zafar A. Khan, 2021. "Nexus between Household Energy and Poverty in Poorly Documented Developing Economies—Perspectives from Pakistan," Sustainability, MDPI, vol. 13(19), pages 1-20, September.
    4. Decun Wu & Jinping Liu, 2020. "Threshold Effects of Restraining Factors on China’s Provincial Ecological Footprint in the Process of Urbanization," IJERPH, MDPI, vol. 17(7), pages 1-19, April.
    5. Georgeta Soava & Anca Mehedintu & Mihaela Sterpu & Eugenia Grecu, 2021. "The Impact of the COVID-19 Pandemic on Electricity Consumption and Economic Growth in Romania," Energies, MDPI, vol. 14(9), pages 1-25, April.
    6. Sajid Abrar & Hooman Farzaneh, 2021. "Scenario Analysis of the Low Emission Energy System in Pakistan Using Integrated Energy Demand-Supply Modeling Approach," Energies, MDPI, vol. 14(11), pages 1-30, June.
    7. Olga Porro & Francesc Pardo-Bosch & Núria Agell & Mónica Sánchez, 2020. "Understanding Location Decisions of Energy Multinational Enterprises within the European Smart Cities’ Context: An Integrated AHP and Extended Fuzzy Linguistic TOPSIS Method," Energies, MDPI, vol. 13(10), pages 1-29, May.
    8. Raul Arango Miranda & Robert Hausler & Rabindranarth Romero Lopez & Mathias Glaus & Jose Ramon Pasillas-Diaz, 2020. "Testing the Environmental Kuznets Curve Hypothesis in North America’s Free Trade Agreement (NAFTA) Countries," Energies, MDPI, vol. 13(12), pages 1-13, June.
    9. Azam, Anam & Ateeq, Muhammad & Shafique, Muhammad & Rafiq, Muhammad & Yuan, Jiahai, 2023. "Primary energy consumption-growth nexus: The role of natural resources, quality of government, and fixed capital formation," Energy, Elsevier, vol. 263(PA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lean, Hooi Hooi & Smyth, Russell, 2010. "Multivariate Granger causality between electricity generation, exports, prices and GDP in Malaysia," Energy, Elsevier, vol. 35(9), pages 3640-3648.
    2. Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
    3. Dakpogan, Arnaud & Smit, Eon, 2018. "The effect of electricity losses on GDP in Benin," MPRA Paper 89545, University Library of Munich, Germany.
    4. Sofien, Tiba & Omri, Anis, 2016. "Literature survey on the relationships between energy variables, environment and economic growth," MPRA Paper 82555, University Library of Munich, Germany, revised 14 Sep 2016.
    5. 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.
    6. Kyophilavong, Phouphet & Shahbaz, Muhammad & Kim, Byoungki & OH, Jeong-Soo, 2017. "A note on the electricity-growth nexus in Lao PDR," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 1251-1260.
    7. Tiba, Sofien & Omri, Anis, 2017. "Literature survey on the relationships between energy, environment and economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 1129-1146.
    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, 2014. "An international literature survey on energy-economic growth nexus: Evidence from country-specific studies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 951-959.
    10. Muhammad Shahbaz & Mete Feridun, 2012. "Electricity consumption and economic growth empirical evidence from Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(5), pages 1583-1599, August.
    11. Saleheen, Khan & Farooq Ahmed, Jam & Muhammad, Shahbaz, 2012. "Electricity Consumption and Economic Growth in Kazakhstan: Fresh Evidence from a Multivariate Framework Analysis," MPRA Paper 43460, University Library of Munich, Germany, revised 20 Dec 2012.
    12. Shahbaz, Muhammad & Lean, Hooi Hooi, 2012. "The dynamics of electricity consumption and economic growth: A revisit study of their causality in Pakistan," Energy, Elsevier, vol. 39(1), pages 146-153.
    13. Apergis, Nicholas & Payne, James E., 2011. "A dynamic panel study of economic development and the electricity consumption-growth nexus," Energy Economics, Elsevier, vol. 33(5), pages 770-781, September.
    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. Payne, James E., 2010. "A survey of the electricity consumption-growth literature," Applied Energy, Elsevier, vol. 87(3), pages 723-731, March.
    16. Chor Foon Tang and Eu Chye Tan, 2012. "Electricity Consumption and Economic Growth in Portugal: Evidence from a Multivariate Framework Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    17. 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.
    18. Hasanov, Fakhri & Bulut, Cihan & Suleymanov, Elchin, 2017. "Review of energy-growth nexus: A panel analysis for ten Eurasian oil exporting countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 369-386.
    19. Chen, Ping-Yu & Chen, Sheng-Tung & Chen, Chi-Chung, 2012. "Energy consumption and economic growth—New evidence from meta analysis," Energy Policy, Elsevier, vol. 44(C), pages 245-255.
    20. Janesh Sami, 2011. "Multivariate Cointegration and Causality between Exports, Electricity Consumption and Real Income per Capita: Recent Evidence from Japan," International Journal of Energy Economics and Policy, Econjournals, vol. 1(3), pages 59-68, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:13:y:2020:i:4:p:837-:d:320700. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.