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Energy Consumption, Bank Credit and Manufacturing Industry Performance: A Panel ARDL Analysis in Western Indonesia

Author

Listed:
  • Amaluddin Amaluddin

    (Economics and Business Faculty, Universitas Padjadjaran, Bandung, Indonesia)

  • Rina Indiastuti

    (Economics and Business Faculty, Universitas Padjadjaran, Bandung, Indonesia)

  • Nury Effendi

    (Economics and Business Faculty, Universitas Padjadjaran, Bandung, Indonesia)

  • Cupian Cupian

    (Economics and Business Faculty, Universitas Padjadjaran, Bandung, Indonesia)

Abstract

The energy growth nexus is still being debated due to mixed empirical findings. This study seeks to establish a relationship between energy consumption, bank credit, and the performance of the manufacturing industry. This study also aims to determine the pattern of the dynamic causal relationship between energy use, bank credit, and the performance of the manufacturing industry in 17 provinces in western Indonesia. This study used secondary data from the Central Bureau of Statistics and the Financial Services Authority. Panel data are from 17 provinces in western Indonesia, spanning from Q1 2010 to Q4 2022 (2010Q1–2022Q4). We employed the panel ARDL and causality test to explore the connection between the variables of interest. The panel ARDL confirms that energy consumption and bank credit play a crucial role in boosting the performance of the manufacturing industry in the long term. This study found strong evidence to support the long-term feedback hypothesis of the energy-output growth nexus. However, in the short term, bank credit was statistically insignificant at all confidence levels. We recommended several policies to local governments and stakeholders, prioritizing the provision of more adequate energy infrastructure and greater access for industrial businesses to utilize banking services. Advancing infrastructure and developing the utilization of new renewable energy are proposed to support sustainable economic development.

Suggested Citation

  • Amaluddin Amaluddin & Rina Indiastuti & Nury Effendi & Cupian Cupian, 2024. "Energy Consumption, Bank Credit and Manufacturing Industry Performance: A Panel ARDL Analysis in Western Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 14(5), pages 372-379, September.
    • Handle: RePEc:eco:journ2:2024-05-38
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    More about this item

    Keywords

    Energy; Bank Credit; Manufacturing Industry; Autoregressive Distributed Lag; Causality;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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