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Energy Consumption, Financial Development and Economic Growth in India: New Evidence from a Nonlinear and Asymmetric Analysis

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  • Shahbaz, Muhammad
  • HOANG, Thi Hong Van
  • Kumar, Mantu
  • Roubaud, David

Abstract

This paper investigates the asymmetric relationship between energy consumption and economic growth by incorporating financial development, capital and labour into a production function covering the Indian economy from 1960Q1–2015Q4. The nonlinear autoregressive distributed lag bounds testing approach is applied to examine the asymmetric cointegration between the variables. An asymmetric causality test is also employed to examine the causal association between the considered variables. The results indicate cointegration between the variables in the presence of asymmetries. The asymmetric causality results show that only negative shocks in energy consumption have impacts on economic growth. In the same vein, only negative shocks in financial development have impacts on economic growth. By contrast, symmetrically, capital formation causes economic growth. Finally, over the study period, a neutral effect exists between the labour force and economic growth in India. The implications of these results for growth policies in India are also discussed.

Suggested Citation

  • Shahbaz, Muhammad & HOANG, Thi Hong Van & Kumar, Mantu & Roubaud, David, 2017. "Energy Consumption, Financial Development and Economic Growth in India: New Evidence from a Nonlinear and Asymmetric Analysis," MPRA Paper 76527, University Library of Munich, Germany, revised 01 Feb 2017.
    • Handle: RePEc:pra:mprapa:76527
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    More about this item

    Keywords

    Financial Development; Energy; Growth; India; Asymmetries;
    All these keywords.

    JEL classification:

    • C0 - Mathematical and Quantitative Methods - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

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