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The Dynamic Link of Energy Consumption, Economic Growth and Poverty in Eastern Indonesia: Panel VECM and FMOLS Approach

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  • Erly Leiwakabessy

    (Faculty of Economics and Business, Universitas Pattimura, Nusaniwe, Indonesia.)

  • Rukmuin Wilda Payapo

    (Faculty of Economics and Business, Universitas Pattimura, Ambon, Indonesia.)

Abstract

This study aims to investigate the pattern of dynamic relationships between energy consumption, economic growth, and poverty in panel data set of 12 provinces of Eastern Indonesia during the period 2009-2019. PVECM and FM-OLS were applied to analyze the dynamic link of the variables both in the short and long term. All secondary data used were collected from BPS and the Ministry of Energy and Mineral Resources. The results of this empirical study in the short term corroborate the neutrality hypothesis, which reveals that there is no short-term relationship in the case of energy-growth nexus, energy-poverty nexus, and poverty-growth nexus. In the long term, empirical evidence corroborates the feedback hypothesis in the case of the energy-growth nexus and poverty-growth nexus. Concerning the long-run energy-growth nexus, the increase in energy consumption has a positive effect on the acceleration of economic growth, and also the increase in economic growth requires the fulfillment of adequate energy consumption. Furthermore, a feedback relationship is found in the poverty-growth nexus case which explains that the progress of poverty reduction is significantly determined by sustainable economic growth that supports several previous studies and the trickle-down economics argument or pro-growth-poverty. On the other hand, widespread poverty has a negative impact on the achievement of economic growth.

Suggested Citation

  • Erly Leiwakabessy & Rukmuin Wilda Payapo, 2022. "The Dynamic Link of Energy Consumption, Economic Growth and Poverty in Eastern Indonesia: Panel VECM and FMOLS Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 12(2), pages 83-90, March.
    • Handle: RePEc:eco:journ2:2022-02-8
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    More about this item

    Keywords

    Energy; Economic Growth; Poverty; Causality; Fully Modified Ordinary Least Squares;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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