The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries (original) (raw)
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Journal of Policy Modeling, 1997
Departing from previous studies on the causal relationship between energy consumption and economic growth, this paper illustrates how the finding of cointegration (i.e., longterm equilibrium relationship) between these variables, may be used in testing Granger causality. Based on the most recent Johansen's multiple cointegration tests preceded by various unit root or nonstationarity tests, we test for cointegration between total energy consumption, real income, and price level of two highly energy dependent East-Asian NICs: Korea and Taiwan. Nonrejection of cointegration between variables rules out Granger noncausality and implies at least one way of Granger causality, either unidirectional or bidirectional. Secondly, by using a dynamic vector error-correction model, we then analyze the direction of Granger causation and hence the within-sample Granger exogeneity or endogeneity of each of the variables. Thirdly, the relative strength of the causality is gauged (through the dynamic variance decomposition technique) by decomposing the total impact of an unanticipated shock to each of the variables beyond the sample period, into proportions attributable to shocks in the other variables, including its own, in the multivariate system. Finally, these response paths of shocks to the system are traced out using impulse response graphs. Results based on these four dynamic tools of analysis Address correspondence to Abul M.M. Masih, A.M.M. Masih and R. Masih
Energy Economics, 1996
Unlike previous studies on the causal relationship between energy consumption and economic growth, this paper illustrates how the finding of cointegration (i.e. long-term equilibrium relationship) between these variables, may be used in testing Granger causality. Based on the most recent Johansen's multivariate cointegration tests preceded by various unit root or non-stationarity tests, we test for cointegration between total energy consumption and real income of six Asian economies: India, Pakistan, Malaysia, Singapore, Indonesia and the Philippines. Non-rejection of cointegration between variables rules out Granger non-causality and imples at least one way of Granger-causality, either unidirectional or bidirectionial. Secondly, by using a dynamic vector error-correction model, we then analyse the direction of Granger-causation and hence the within-sample Granger-exogeneity or endogeneity of each of the variables. Thirdly, the relative strength of the causality is gauged (through the dynamic variance decomposition technique) by decomposing the total impact of an unanticipated shock to each of the variables beyond the sample period, into proportions attributable to shocks in the other variables including its own, in the bivariate system. Results based on these tools of methodology indicate that while all pair-wise relationships shared common univariate integrational properties, only relationships for three countries (India, Pakistan and Indonesia) were cointegrated. For these countries, temporal causality results were mixed with unidirectional causality from energy to income for India, exactly the reverse for Indonesia, and mutual causality for Pakistan. The VDCs were not inconsistent with these results and provided us with an additional insight as to the relatively more *Corresponding author. Phone: 268 8091; Fax: (616) 268 8450; Telex: ADFADM AA 62030; E-Mail: a-masih@adfa.oz.au 0140-9883/96/$15.00 dominant direction of causation in Pakistan. Simple bivariate vector-autoregressive models for the three non-cointegrated systems did not indicate any direction of causality, significantly in either direction. JEL classification: Q43; C52
International Journal of Energy Economics and Policy
The purpose of this paper is to empirically and economically investigate the causal relationship between economic growth and energy consumption in five countries with high consumption during the period of 1968-2016. These countries are China, India, Japan, the United States, and Saudi Arabia. Using the cointegration relationship between the variables procedure and the Granger causality test. This period witnessed various changes in the economy, consumption, and production of these countries. The causality results for the countries show that there is a unidirectional, and bidirectional Granger causality between the variables. Therefore, the energy conservation policy should be designed with caution, as energy is an engine for gross domestic product growth.
This article examines the short-and long-run causal relationship between energy consumption and GDP of six emerging economies of Asia. Based on cointegration and vector error correction modeling the empirical results show that there exists unidirectional short-and longrun causality running from energy consumption to GDP for China, uni-directional short-run causality from output to energy consumption for India, whilst bi-directional short-run causality for Thailand. Neutrality between energy consumption and income is found for Indonesia, Malaysia and Philippines. Both the generalized variance decompositions and impulse response functions confirm the direction of causality. These findings have important policy implications for the countries concerned. The results suggest that while India may directly initiate energy conservation measures, China and Thailand may opt for a balanced combination of alternative polices.
Energy-GDP Relationship: A Causal Analysis for the Five Countries of South Asia
Economic Growth, 2008
We investigate the causal relationship between GDP and different types of energy consumption for the five South Asian Countries; Pakistan, India, Sri Lanka, Bangladesh and Nepal by using Error Correction Model and Toda and Yamamoto(1995) approach. For Pakistan evidence shows that there is unidirectional Granger causality running from coal to GDP, and unidirectional Granger causality running from GDP to electricity consumption and total energy consumption. For India no causality in either direction between GDP and different energy consumption is detected. For Sri Lanka there is unidirectional Granger causality running from GDP to electricity consumption and total energy consumption. For Bangladesh unidirectional Granger causality is detected from GDP to electricity consumption and from gas consumption to GDP. For Nepal causal direction is from petroleum to GDP.
Causality between energy consumption and economic growth in India: a note on conflicting results
Energy Economics, 2004
This note examines the different direction of causal relation between energy consumption and economic growth in India. Applying Engle-Granger cointegration approach combined with the standard Granger causality test on Indian data for the period 1950-1996, we find that bi-directional causality exists between energy consumption and economic growth. Further, we apply Johansen multivariate cointegration technique on the different set of variables. The same direction of causality exists between energy consumption and economic growth. This is different from the results obtained in earlier studies.
Asian Journal of Research in Social Sciences and Humanities, 2017
This paper investigates the causal relationship between primary energy consumption, energy prices and real GDP for India, using cointegration and error correction modelling techniques. Using annual data for the period 1977-2014, the study finds that real GDP, energy consumption and its prices are cointegrated and that in the long run energy consumption and its prices Granger cause real GDP; real GDP and energy consumption Granger cause prices. Our empirical results also indicate that there is a unidirectional short run causality running from real GDP to energy consumption and from energy consumption to prices without any feedback effect. The analysis of this study, hence, imply that energy serves as an important source of GDP growth in India and energy conservation policies that aim at curtailing energy use, must find ways of reducing consumer demand and efficiency in use.
Temporal Causality between Energy Consumption and Income in Six Asian Emerging Countries
Applied Economics Quarterly, 2009
This article examines the short-and long-run causal relationship between energy consumption and output in six non-OECD Asian developing countries. Standard time series econometrics is used for this purpose. Based on cointegration and vector error correction modeling, the empirical result shows a bi-directional causality between energy consumption and income in Malaysia, while a unidirectional causality from output to energy consumption in China and Thailand and energy consumption to output in India and Pakistan. Bangladesh remains as an energy neutral economy confirming the fact that it is one of the lowest energy consuming countries in Asia. Both the generalized variance decompositions and the impulse response functions confirm the direction of causality in these countries. These findings have important policy implications for concerned countries. Countries like China and Thailand may contribute to the fight against global warming directly implementing energy conservation measures whereas India and Pakistan may focus on technological developments and mitigation policies. For Malaysia, a balanced combination of alternative policies seems to be appropriate.
CAUSALITY AND DYNAMICS OF ENERGY CONSUMPTION AND OUTPUT: EVIDENCE FROM NON-OECD ASIAN COUNTRIES
2008
This article examines the short-run and long-run causal relationship between energy consumption and output in six non-OECD Asian developing countries. Standard time series econometrics is used for this purpose. Based on cointegration and vector error correction modeling, the empirical result shows a bi-directional causality between energy consumption and income in Malaysia, while a unidirectional causality from output to energy consumption in China and Thailand and energy consumption to output in India and Pakistan. Bangladesh remains as an energy neutral economy confirming the fact that it is one of the lowest energy consuming countries in Asia. Both the generalized variance decompositions and the impulse response functions confirm the direction of causality in these countries. These findings have important policy implications for concerned countries. Countries like China and Thailand may contribute to the fight against global warming directly implementing energy conservation measures whereas India and Pakistan may focus on technological developments and mitigation policies. For Malaysia, a balanced combination of alternative policies seems to be appropriate.