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Do Primary Energy Consumption and Economic Growth Drive Each Other in Pakistan? Implications for Energy Policy

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  • Shazia Farhat Durrani

    (The University of Agriculture Peshawar)

  • Inayatullah Jan

    (The University of Agriculture Peshawar)

  • Munir Ahmad

    (Zhejiang University)

Abstract

Since energy supports the economic production activities and has been considered the engine of economic growth, it is of central importance to investigate their mutual relationships. We examine the causality between primary energy consumption and economic growth in Pakistan for the period of 1972 to 2015. We adopt a multivariate causality framework by adding primary energy consumption to labor and capital as input factors in the production model. The results of the Toda–Yamamoto Granger causality test confirm the existence of bidirectional causality between primary energy consumption and GDP, thereby validating the existence of the feedback hypothesis in Pakistan. The findings of the study call for the government to adopt policies for energy efficiency and expansion rather than energy conservation. Moreover, the renewable energy consumption share should be upscaled in the current energy mix to strengthen the economic activities by keeping the environmental sustainability objective as a top priority of the country.

Suggested Citation

  • Shazia Farhat Durrani & Inayatullah Jan & Munir Ahmad, 2021. "Do Primary Energy Consumption and Economic Growth Drive Each Other in Pakistan? Implications for Energy Policy," Biophysical Economics and Resource Quality, Springer, vol. 6(3), pages 1-10, September.
    • Handle: RePEc:spr:bioerq:v:6:y:2021:i:3:d:10.1007_s41247-021-00090-x
    DOI: 10.1007/s41247-021-00090-x
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    3. Phan, Thuy Chung, 2023. "Energy prices volatility, natural resource policy-making and green economic recovery in post COVID-19 era: Evidence from BRICS countries," Resources Policy, Elsevier, vol. 87(PA).
    4. Maxwell Chukwudi Udeagha & Marthinus Christoffel Breitenbach, 2023. "The Role of Fiscal Decentralization in Limiting CO2 Emissions in South Africa," Biophysical Economics and Resource Quality, Springer, vol. 8(3), pages 1-30, September.
    5. Maxwell Chukwudi Udeagha & Marthinus Christoffel Breitenbach, 2023. "Revisiting the nexus between fiscal decentralization and CO2 emissions in South Africa: fresh policy insights," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-46, December.

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    More about this item

    Keywords

    Primary energy consumption; Economic growth; Granger causality; Bidirectional causal relationship; Energy efficiency;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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