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Triangular Relationship between Energy Consumption, Price Index and National Income in Asian Countries: A Pooled Mean Group Approach in Presence of Structural Breaks

Author

Listed:
  • Bilal Mehmood

    (Department of Economics, GC University, Lahore, Pakistan.)

  • Syed Hassan Raza

    (Department of Economics, Lahore Leads University, Lahore, Pakistan.)

  • Mahwish Rana

    (Department of Economics, Lahore Leads University, Lahore, Pakistan.)

  • Huma Sohaib

    (Department of Economics, Lahore Leads University, Lahore, Pakistan.)

  • Muhammad Azhar Khan

    (Department of Economics, Lahore Leads University, Lahore, Pakistan.)

Abstract

Energy consumption is a key factor in economic activity. To ascertain its role in economic growth, this study empirically investigates its role for Asian countries. Price index is also included in analysis as factor of economic growth. We examine and quantify this long run relationship for a sample of selected Asian countries with data on relevant variables for a large time dimension (1970 to 2012). Econometric precision is brought by using pooled mean group (PMG) besides other Pedroni, Kao and Westerlund panel cointegration tests. PMG being heterogeneous panels estimation technique allows the slope and short run parameters to vary across the countries. Structural breaks are also incorporated to observe the impact of shocks that leave permanent effect on national income. Results show the presence of long run relationship between energy consumption and national income. The positive contribution of energy consumption is quantified using Fully Modified OLS and dynamic OLS as well. Policy recommendations are made on the basis of empirical analysis.

Suggested Citation

  • Bilal Mehmood & Syed Hassan Raza & Mahwish Rana & Huma Sohaib & Muhammad Azhar Khan, 2014. "Triangular Relationship between Energy Consumption, Price Index and National Income in Asian Countries: A Pooled Mean Group Approach in Presence of Structural Breaks," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 610-620.
    • Handle: RePEc:eco:journ2:2014-04-11
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    More about this item

    Keywords

    Energy consumption; National income; Price index; Pedroni Cointegration; Kao Cointegration; Westerlund Test; Structural breaks;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • P44 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - National Income, Product, and Expenditure; Money; Inflation

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