IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Modeling the causal relationship between energy and growth factors: Journey towards sustainable development

Listed author(s):
  • Mumtaz, Rehma
  • Zaman, Khalid
  • Sajjad, Faiza
  • Lodhi, Muhammad Saeed
  • Irfan, Muhammad
  • Khan, Imran
  • Naseem, Imran
Registered author(s):

    The objective of the study was to find the direction of the causality between energy consumption and six broad categories of growth factors i.e., trade factors, education indicators, growth measures, environmental indicators, health variables and population growth in Pakistan over a period of 1975–2010. For this purpose, cointegration and Granger causality tests have been applied. In this study, energy consumption and growth factors are explicitly included in model. The result shows that trade in services, FDI and exports have a significant and positive contribution to increases energy consumption in Pakistan, however, the intensity of the relationship with the energy consumption is different in nature, as exports have around 2.049 percent increases energy consumption, if there is one percent increase in exports. Imports, on the other hand, have a negative relationship with energy consumption in Pakistan. The impact of education indicators (i.e., education expenditure, primary & secondary school enrollment and literacy rate) on energy consumption is positive, which confirms that education has a strategic role in improving energy efficiency. Sectoral growth (i.e., agriculture, industry, manufacturing, services sector and economic growth) have a positive contribution to increase energy consumption in Pakistan. As, agriculture and industry value added serves as an engine of energy, hence, as agriculture modernizes, energy demand increases. Carbon dioxide emission and natural resource depletion both increases energy consumption in Pakistan, however, arable land decreases energy consumption around 1.743 percent. The impact of health care indicators (i.e., health expenditure, life expectancy and mortality) increases the demand for energy. Energy progress has been seen as a factor of supply and demand which explains the growth of health care expenditures. Population indicators (i.e., population growth, urban population, rural population, unemployment and labor force) have a significant and positive association with the energy consumption in Pakistan. The results of Granger causality indicates that there has been a unidirectional causality running towards energy consumption to trade factors (i.e., trade in services, FDI and imports) but not vice versa. The result indicates that energy consumption is found to Granger cause imports, which means that any reductions in energy consumption, energy conservation polices would reduce imports and lessen the benefits of trade. Similarly, energy consumption Granger cause education factors (i.e., primary and secondary school enrollment); growth factors (i.e., agriculture, industry and manufacturing value added); environmental factor (i.e., carbon dioxide emissions); health factor (i.e., mortality) and population measures (i.e., population growth, urban and rural population) but not vice versa, however, the remaining sub-variables are independent in nature and there has been no causality found with the energy consumption in Pakistan. The overall result concludes that causality running towards energy consumption to macroeconomic factors in Pakistan but not other way around.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0960148113005004
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Renewable Energy.

    Volume (Year): 63 (2014)
    Issue (Month): C ()
    Pages: 353-365

    as
    in new window

    Handle: RePEc:eee:renene:v:63:y:2014:i:c:p:353-365
    DOI: 10.1016/j.renene.2013.09.033
    Contact details of provider: Web page: http://www.journals.elsevier.com/renewable-energy

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Ang, James B., 2007. "CO2 emissions, energy consumption, and output in France," Energy Policy, Elsevier, vol. 35(10), pages 4772-4778, October.
    2. David I. Stern and Astrid Kander, 2012. "The Role of Energy in the Industrial Revolution and Modern Economic Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    3. Michael T. Toman & Barbora Jemelkova, 2003. "Energy and Economic Development: An Assessment of the State of Knowledge," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 93-112.
    4. 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.
    5. Mahmud, Fakhre & Chishti, Salim, 1990. "The demand for energy in the large-scale manufacturing sector of Pakistan," Energy Economics, Elsevier, vol. 12(4), pages 251-254, October.
    6. repec:bla:restud:v:57:y:1990:i:1:p:99-125 is not listed on IDEAS
    7. Kahsai, Mulugeta S. & Nondo, Chali & Schaeffer, Peter V. & Gebremedhin, Tesfa G., 2012. "Income level and the energy consumption–GDP nexus: Evidence from Sub-Saharan Africa," Energy Economics, Elsevier, vol. 34(3), pages 739-746.
    8. Ebohon, Obas John, 1996. "Energy, economic growth and causality in developing countries : A case study of Tanzania and Nigeria," Energy Policy, Elsevier, vol. 24(5), pages 447-453, May.
    9. Suri, Vivek & Chapman, Duane, 1998. "Economic growth, trade and energy: implications for the environmental Kuznets curve," Ecological Economics, Elsevier, vol. 25(2), pages 195-208, May.
    10. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    11. Sadorsky, Perry, 2012. "Energy consumption, output and trade in South America," Energy Economics, Elsevier, vol. 34(2), pages 476-488.
    12. Apergis, Nicholas & Payne, James E., 2010. "The emissions, energy consumption, and growth nexus: Evidence from the commonwealth of independent states," Energy Policy, Elsevier, vol. 38(1), pages 650-655, January.
    13. van Ruijven, Bas & Urban, Frauke & Benders, René M.J. & Moll, Henri C. & van der Sluijs, Jeroen P. & de Vries, Bert & van Vuuren, Detlef P., 2008. "Modeling Energy and Development: An Evaluation of Models and Concepts," World Development, Elsevier, vol. 36(12), pages 2801-2821, December.
    14. Hansen, Bruce E., 1992. "Efficient estimation and testing of cointegrating vectors in the presence of deterministic trends," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 87-121.
    15. 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.
    16. Asafu-Adjaye, John, 2000. "The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries," Energy Economics, Elsevier, vol. 22(6), pages 615-625, December.
    17. Dirk Pilat & Paul Schreyer, 2003. "Measuring productivity," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 127-170.
    18. Andreoni, V. & Galmarini, S., 2012. "Decoupling economic growth from carbon dioxide emissions: A decomposition analysis of Italian energy consumption," Energy, Elsevier, vol. 44(1), pages 682-691.
    19. Lee, Chien-Chiang & Chang, Chun-Ping, 2008. "Energy consumption and economic growth in Asian economies: A more comprehensive analysis using panel data," Resource and Energy Economics, Elsevier, vol. 30(1), pages 50-65, January.
    20. Vaillancourt, Kathleen & Labriet, Maryse & Loulou, Richard & Waaub, Jean-Philippe, 2008. "The role of nuclear energy in long-term climate scenarios: An analysis with the World-TIMES model," Energy Policy, Elsevier, vol. 36(7), pages 2296-2307, July.
    21. Apergis, Nicholas & Payne, James E., 2012. "Renewable and non-renewable energy consumption-growth nexus: Evidence from a panel error correction model," Energy Economics, Elsevier, vol. 34(3), pages 733-738.
    22. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
    23. 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.
    24. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    25. Khalid Zaman & Waseem Ikram & Iqtidar Ali Shah, 2010. "Bivariate cointegration between poverty and environment: a case study of Pakistan (1980-2009)," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 53(8), pages 977-989.
    26. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
    27. Soytas, Ugur & Sari, Ramazan & Ewing, Bradley T., 2007. "Energy consumption, income, and carbon emissions in the United States," Ecological Economics, Elsevier, vol. 62(3-4), pages 482-489, May.
    28. Rehana Siddiqui, 2004. "Energy and Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(2), pages 175-200.
    29. Zaman, Khalid & Khan, Muhammad M. & Ahmad, Mehboob & Rustam, Rabiah, 2012. "Determinants of electricity consumption function in Pakistan: Old wine in a new bottle," Energy Policy, Elsevier, vol. 50(C), pages 623-634.
    30. Pirlogea, Corina & Cicea, Claudiu, 2012. "Econometric perspective of the energy consumption and economic growth relation in European Union," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(8), pages 5718-5726.
    31. Mirza, Umar K. & Ahmad, Nasir & Majeed, Tariq, 2008. "An overview of biomass energy utilization in Pakistan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 12(7), pages 1988-1996, September.
    32. Hamit-Haggar, Mahamat, 2012. "Greenhouse gas emissions, energy consumption and economic growth: A panel cointegration analysis from Canadian industrial sector perspective," Energy Economics, Elsevier, vol. 34(1), pages 358-364.
    Full references (including those not matched with items on IDEAS)

    This item is featured on the following reading lists or Wikipedia pages:

    1. Recognized plagiarism

    When requesting a correction, please mention this item's handle: RePEc:eee:renene:v:63:y:2014:i:c:p:353-365. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.