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Interaction between Energy Consumption and Economic Growth in Pakistan: A More Comprehensive Analysis Using ARDL Approach

Author

Listed:
  • Oshin Khan

    (M.Phil Graduate, Quaid-I-Azam University, Islamabad, Pakistan.)

  • Muhammad Zeeshan Younas

    (PhD Scholar, Quaid-I-Azam University, Islamabad, Pakistan.)

Abstract

Energy arguably plays a substantial part in the economic growth process. In this paper, we examine the intertemporal causal relationship between energy consumption and economic growth in Pakistan during the period of 1985?2017. Unlike the majority of the previous studies, we employ the newly developed autoregressive distributed lag (ARDL)-bounds testing approach by Pesaran et al. (2001) to examine this association. It is an attempt to explore the long run ties for energy consumption and energy intensity with economic growth, urbanization, trade openness, and financial development. Results postulate that the trade openness has a positive impact on energy consumption while urbanization and financial development have a negative influence. As far as sectoral analysis is concerned, agriculture and manufacturing share has a positive imprint on energy while the services sector has a negative effect. Overall, the study finds that energy consumption spurs economic growth in Pakistan. The findings have practical policy implications for decision makers in the area of macroeconomic planning.

Suggested Citation

  • Oshin Khan & Muhammad Zeeshan Younas, 2019. "Interaction between Energy Consumption and Economic Growth in Pakistan: A More Comprehensive Analysis Using ARDL Approach," Energy Economics Letters, Asian Economic and Social Society, vol. 6(1), pages 30-51, March.
  • Handle: RePEc:asi:eneclt:2019:p:30-51
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    References listed on IDEAS

    as
    1. Pradyot Ranjan Jena & Ulrike Grote, 2008. "Growth–trade–environment nexus in India," Economics Bulletin, AccessEcon, vol. 17(11), pages 1-11.
    2. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, April.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    5. Pesaran, M Hashem, 1997. "The Role of Economic Theory in Modelling the Long Run," Economic Journal, Royal Economic Society, vol. 107(440), pages 178-191, January.
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    8. Farhani, Sahbi & Solarin, Sakiru Adebola, 2017. "Financial development and energy demand in the United States: New evidence from combined cointegration and asymmetric causality tests," Energy, Elsevier, vol. 134(C), pages 1029-1037.
    9. Gilbert E. Metcalf, 2008. "An Empirical Analysis of Energy Intensity and Its Determinants at the State Level," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-26.
    10. Akarca, Ali T. & Long, Thomas II, 1979. "Energy and employment: a time-series analysis of the causal relationship," Resources and Energy, Elsevier, vol. 2(2-3), pages 151-162.
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    More about this item

    Keywords

    Energy consumption; Financial development; Urbanization; Trade openness; Economic growth.;

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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