Cointegration and Causality Analysis of Dynamic Linkage between Industrial Energy Consumption and Economic Growth in Pakistan

Abstract

Energy consumption is a crucial factor to promote industrial sector contribution in an economy for its economic progression. Indeed, Pakistan is an emerging country, but recently adjoining with a very severe deficit of electricity sources. Hence, the industry value added growth leading to economic progression is also fronting inevitable challenges to promote the industry growth. The main objective of the study is to investigate the linkages between industrial sector oil, gas and electricity consumption, and renewable energy consumption with economic development in Pakistan. The findings display evidence of cointegration and a long-run relationship between the consumption of industrial energy and economic growth in Pakistan. The results showed that industrial electricity consumption and industrial gas consumption have a positive and statistically significant impact on economic growth both in the long run and the short run in Pakistan. Industrial oil consumption negatively impacts economic growth in the long run, but positively and statistically significantly impacts economic growth in the short run in Pakistan. Moreover, indications through the vector error correction model (VECM) model confirmed bi-directional relationships of industrial sector oil consumption and economic growth in Pakistan. Furthermore, the uni-directional nexus instituted between economic growth to industrial electricity consumption, industrial gas consumption to industrial electricity consumption, and industrial oil consumption to industrial electricity consumption. The findings uncovered solid interconnections among the studied variables and suggested that the Pakistani government should build a robust policy to diminish the oil, gas, and fossil fuels consumption for electricity production, as a replacement to depend on solar, hydro, wind, and biomass energy sources in Pakistan. Consequently, the government should promote more gas concentrated projects, as these will alleviate the contests of gas dearth and provide it to the industry at cheap prices with ease.

Incorporating Environmental Pollution and Human Development in the Energy-Growth Nexus: A Novel Long Run Investigation for Pakistan

“…The rate of energy consumption has increased in the last two decades, and Pakistan has witnessed an 80% rise in energy demands in the previous 15 years [ 6 ]. Pakistan is utilizing traditional energy resources to meet its rising energy demands [ 7 ].…”

Renewable Energy, Economic Growth and Economic Development Nexus: A Bibliometric Analysis

“…Belt Road countries were investigated by [110,111], SAARC and ASEAN countries [112], as well as, South Korea [113], Bangladesh [114], Malaysia [115][116][117][118], Indonesia [119][120][121][122][123], Vietnam [124], Taiwan [125], Pakistan [126][127][128][129][130], Kazakhstan [131,132], and Thailand [133]. Not many studies dealing with the African continent [134] investigate the continent, [135] sub-Saharan Africa, [136] Rwanda, [137] Cameron, Nigeria [138], [139] Ethiopia and [140] Tunisia.…”

Empirical Insights into the Long-Run Linkage between Households Energy Consumption and Economic Growth: Macro-Level Empirical Evidence from Pakistan

“…The accessibility of electricity helps meet household and domestic needs, stimulates export potentials of the country to create employment, reduces poverty, and, ultimately, improves socio-economic development [4,[30][31][32]. Electricity, therefore, plays a key role for the economic progression of a country, which brings much more assistance to all dynamic sectors of an economy [2,33]. Due to these facts, empirical research has been previously conducted to inspect the impact of electricity usage on economic development in developing and developed countries.…”

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