Energy consumption and economic growth in oil importing and oil exporting countries: A Panel ARDL approach

In this paper, we examine the relationship between energy consumption and economic growth in selected oil exporting and oil importing countries using annual data form from 1980 to 2014. The paper contributes to the extant literature on energy consumption-growth nexus in the following three ways. First, it compares energy consumption-growth nexus of oil importing countries with that of oil exporting countries. Second, it accounts for any inherent heterogeneity feature of these categories of countries as well as non-stationarity concern in long panels by using the mean group and pooled group estimators. Thirdly, it employs Panel ARDL model which facilitates the estimation of both long run and short run elasticities in panel form. From the empirical analysis, we find that, in the long run, energy consumption has positive and significant effect on economic growth both for oil exporting and oil importing countries although the effect is observed to be higher for the former than the latter. In the presence of shock however, oil importing countries tend to adjust faster than oil exporting countries. This can be attributed to the structure of economy of most oil exporting countries which is largely oil-based and therefore, any shock to the variable will have a greater impact on their macro-economy compared to a well-diversified economy of oil importing countries.