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Coal Consumption and Economic Growth Revisited: Structural Breaks, Cointegration and Causality Tests for Pakistan

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  • Kumar, Saten
  • Shahbaz, Muhammad

Abstract

A global profusion of coal provides many countries with opportunities for economic growth. The direction of causality between coal consumption and economic growth is useful for policy making, however, existing empirical evidence have failed to reach a consensus. This paper examined the liaison between coal consumption and economic growth for Pakistan over the period 1971-2009. The endogenous two-break LM unit test, derived in Lee and Strazicich (2003), is used to assess the order of integration of the variables and structural breaks in the data series. Application of the Autoregressive Distributed Lag (ARDL) bounds test reveals a cointegrating relationship between real income, real capital stock, labour and coal consumption, and further application of General to Specific (GETS), Engle and Granger (EG), Stock Watson’s Dynamic Ordinary Least Squares (DOLS) and Phillip Hansen’s Fully Modified Ordinary Least Squares (FMOLS) methods show statistical robustness of the estimates. The elasticity with respect to coal consumption is positive and significant. The Vector Error Correction Model (VECM) based Granger causality test is also applied for both short-and long-run situations.

Suggested Citation

  • Kumar, Saten & Shahbaz, Muhammad, 2010. "Coal Consumption and Economic Growth Revisited: Structural Breaks, Cointegration and Causality Tests for Pakistan," MPRA Paper 26151, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26151
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    References listed on IDEAS

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    Cited by:

    1. Satti, Saqlain Latif & Hassan, Muhammad Shahid & Mahmood, Haider & Shahbaz, Muhammad, 2014. "Coal consumption: An alternate energy resource to fuel economic growth in Pakistan," Economic Modelling, Elsevier, vol. 36(C), pages 282-287.
    2. Shahbaz, Muhammad, 2015. "Measuring Economic Cost of Electricity Shortage: Current Challenges and Future Prospects in Pakistan," MPRA Paper 67164, University Library of Munich, Germany, revised 12 Oct 2015.
    3. Shahbaz, Muhammad & Lean, Hooi Hooi & Farooq, Abdul, 2013. "Natural gas consumption and economic growth in Pakistan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 18(C), pages 87-94.
    4. Akhmat, Ghulam & Zaman, Khalid, 2013. "Nuclear energy consumption, commercial energy consumption and economic growth in South Asia: Bootstrap panel causality test," Renewable and Sustainable Energy Reviews, Elsevier, vol. 25(C), pages 552-559.
    5. Muhammad, Shahbaz & V G R, Chandran & Pervaiz, Azeem, 2011. "Natural gas consumption and economic growth: cointegration, causality and forecast error variance decomposition tests for Pakistan," MPRA Paper 35103, University Library of Munich, Germany, revised 30 Nov 2011.
    6. Muhammad SHAHBAZ & Smile DUBE, 2012. "Revisiting the Relationship between Coal Consumption and Economic Growth: Cointegration and Causality Analysis in Pakistan," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(1).
    7. Bildirici, Melike E. & Bakirtas, Tahsin, 2014. "The relationship among oil, natural gas and coal consumption and economic growth in BRICTS (Brazil, Russian, India, China, Turkey and South Africa) countries," Energy, Elsevier, vol. 65(C), pages 134-144.
    8. repec:ipg:wpaper:2014-583 is not listed on IDEAS
    9. repec:ipg:wpaper:2014-289 is not listed on IDEAS
    10. Shahbaz, Muhammad & Arouri, Mohamed & Teulon, Frédéric, 2014. "Short- and long-run relationships between natural gas consumption and economic growth: Evidence from Pakistan," Economic Modelling, Elsevier, vol. 41(C), pages 219-226.
    11. Shahbaz, Muhammad & Farhani, Sahbi & Rahman, Mohammad Mafizur, 2013. "Natural Gas Consumption and Economic Growth Nexus: The Role of Exports, Capital and Labor in France," MPRA Paper 50619, University Library of Munich, Germany, revised 12 Oct 2013.

    More about this item

    Keywords

    Coal consumption; economic growth; cointegration; Granger causality;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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