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The Relationship between Energy Consumption and Economic Growth in South and Southeast Asian Countries: A Panel Vector Autoregression Approach and Causality Analysis

Author

Listed:
  • Anthony N. Rezitis

    (Department of Economics and Management, University of Helsinki, P.O. Box 27, Latokartanokaari 9, FI-00014, Finland,
    Department of Business Administration of Food and Agricultural Enterprises, University of Patras, G. Seferi 2, Agrinio 30 100, Greece)

  • Shaikh Mostak Ahammad

    (Department of Business Administration of Food and Agricultural Enterprises, University of Patras, G. Seferi 2, Agrinio 30 100, Greece
    Department of Accounting, Hajee Mohammad Danesh Science and Technology University, Dinajpur 5200, Bangladesh.)

Abstract

This study investigates the dynamic relationship between energy consumption and economic growth in nine South and Southeast Asian countries (i.e., Bangladesh, Brunei Darussalam, India, Indonesia, Malaysia, Pakistan, the Philippines, Sri Lanka, and Thailand) using a panel data framework. The period for the study is 1990-2012, and the World Bank Development Indicators dataset is used. This study applies a panel vector autoregression model to provide impulse response functions (IRFs), which enable the impact of shocks to be examined between real gross domestic product, energy use, real gross fixed capital formation, and total labor force. In addition, panel Granger causality tests are employed to examine the direction of causality between energy consumption and economic growth. The IRFs show that the shocks of all the variables require a long period to reach the long-run equilibrium level and the greatest response of each variable is attributed to its own shock. The panel Granger causality results evidence bidirectional causality effects between energy consumption and economic growth, which supports the feedback hypothesis, meaning that these variables have strong interdependency between each other. Therefore, policy regarding energy consumption should be considered carefully

Suggested Citation

  • Anthony N. Rezitis & Shaikh Mostak Ahammad, 2015. "The Relationship between Energy Consumption and Economic Growth in South and Southeast Asian Countries: A Panel Vector Autoregression Approach and Causality Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 5(3), pages 704-715.
    • Handle: RePEc:eco:journ2:2015-03-09
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    More about this item

    Keywords

    Panel Vector Autoregression; Panel mpulse Response Functions; Panel Granger Causality; SAARC; Association of Southeast Asian Nations;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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