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The Effect of Urbanization, Affluence and Trade Openness on Energy Consumption: A Time Series Analysis in Malaysia

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  • Shahbaz, Muhammad
  • Sbia, Rashid
  • Nanthakumar, Loganathan
  • Afza, Talat

Abstract

This paper investigates the impact of urbanization on energy consumption by applying the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) in case of Malaysia. The study covers the time period of 1970Q1-2011Q4. The unit root test and the ARDL bounds testing approach have been applied to examine integrating properties and long run relationship in the presence of structural breaks. Our results validated the existence of cointegration and exposed that urbanization is a major contributor in energy consumption. Affluence raises energy demand. Capital stock boosts energy consumption. Trade openness leads affluence and hence increases energy consumption. The causality analysis finds that urbanization Granger causes energy consumption. The feedback effect is found between energy consumption and affluence and, energy consumption and capital. The bidirectional causality exists between trade openness and energy consumption.

Suggested Citation

  • Shahbaz, Muhammad & Sbia, Rashid & Nanthakumar, Loganathan & Afza, Talat, 2015. "The Effect of Urbanization, Affluence and Trade Openness on Energy Consumption: A Time Series Analysis in Malaysia," MPRA Paper 62743, University Library of Munich, Germany, revised 11 Mar 2015.
    • Handle: RePEc:pra:mprapa:62743
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    More about this item

    Keywords

    Urbanization; Energy; Malaysia;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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