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Energy-Economy Nexus in Indonesia: A Bivariate Cointegration Analysis

Author

Listed:
  • Ismail O. SOILE

    (Centre for Energy Petroleum Mineral Law and Policy University of Dundee, Scotland, DD1 4HN. United Kingdom)

Abstract

Inefficient pricing of energy products has become common feature of governments in many oil exporting developing countries. As developing countries, this can be justified only when the increased growth results from such higher energy consumption. To this end, the study examined the direction of causality between energy consumption and economic growth, and the possibility of a long run relationship between the two variables using Indonesia’s time series for the period of 1971-2010. The Granger causality test revealed a unidirectional causation running from economic growth to energy consumption, and the existence of a long run relationship. The study therefore suggests the pursuance of major reforms to ensure appropriate pricing of energy products. This can help checkmate excessive consumption with no devastating harm to economic growth

Suggested Citation

  • Ismail O. SOILE, 2012. "Energy-Economy Nexus in Indonesia: A Bivariate Cointegration Analysis," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 2(6), pages 205-218, December.
  • Handle: RePEc:asi:ajoerj:2012:p:205-218
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    Citations

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    Cited by:

    1. Shahbaz, Muhammad & Abosedra, Salah & Sbia, Rashid, 2013. "Energy Consumption, Financial Development and Growth: Evidence from Cointegration with unknown Structural breaks in Lebanon," MPRA Paper 46580, University Library of Munich, Germany.
    2. Shahbaz, Muhammad & Khan, Saleheen & Tahir, Mohammad Iqbal, 2013. "The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis," Energy Economics, Elsevier, vol. 40(C), pages 8-21.
    3. Ismail Oladimeji Soile, 2015. "Bivariate Cointegration Analysis of Energy-Economy Interactions in Iran," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(6), pages 125-139, December.

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