Analysis of coal-related energy consumption in Pakistan: an alternative energy resource to fuel economic development

During the last 4 decades, the world has changed its focus from imported energy resources to cheap resources either renewable or non-renewable for economic and social development. Currently, coal is the cheapest source of energy in Pakistan that can be used to fulfil the energy demands. This study inspects the causal association among domestic factors such as gross domestic product, coal consumption, rural–urban unemployment, rural–urban population, fiscal deficit and services value added from 1981 to 2017. This paper applies modern techniques to inspect the association between coal consumption and economic development of Pakistan. For this, Ng–Perron unit root test, autoregressive distributed lag models and vector error correction models are employed to examine the causalities between the factors. The research finds a long-run and short-run bidirectional association between economic improvement and coal use. In the short run, the results found a bidirectional causality among gross domestic product (GDP), coal consumption, unemployment, population and overall fiscal deficit. In the long run, GDP and coal use have a bidirectional association and the same is true with the other factors. During the period, cumulative sum (CUSUM) and CUSUM square have proved that structure is good. Moreover, we support the coal consumption in producing cheap energy that clues to financial development and unemployment reduction in Pakistan. The policy suggestions for the consequences are provided below.