Energy-Trade-Growth Nexus in the Asia–Pacific: Implications for the Future Economy

This chapter delves into the nuanced relationship between energy consumption, trade, and economic growth in 15 Asia–Pacific nations from 1965 to 2014, utilising the Panel Vector Autoregressive (PVAR) approach. The research meticulously unpacks the influence of both aggregated and disaggregated energy sources on trade and output. Leveraging orthogonalised impulse-response functions, the study offers a unique lens to scrutinise output reactions to energy-related shocks. Contrary to prevalent fears, the findings reveal that the Asia–Pacific’s ambitious energy conservation objectives will not impede its economic trajectory. Instead, trade emerges as a seminal force propelling economic growth, reaffirming the trade-led growth hypothesis. This signifies the region’s urgent need for continued trade liberalisation, especially in the context of mounting protectionist tendencies in the West and evolving trade alliances like the Regional Comprehensive Economic Partnership (RCEP), the ASEAN-China Free Trade Agreement (ACFTA), and One Belt, One Road. Crucially, this chapter underscores that trade liberalisation and energy conservation are not conflicting goals; rather, they can symbiotically further the region’s economic ambitions. Offering invaluable insights for decision-makers and academics, the study suggests that the Asia–Pacific can concurrently champion energy efficiency and robust economic growth, with trade poised as the cornerstone of its forthcoming economic ascent.