Triangular Relationship between Energy Consumption, Price Index and National Income in Asian Countries: A Pooled Mean Group Approach in Presence of Structural Breaks

Bilal Mehmood (), Syed Hassan Raza, Mahwish Rana, Huma Sohaib and Muhammad Azhar Khan
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Syed Hassan Raza: Department of Economics, Lahore Leads University, Lahore, Pakistan.
Mahwish Rana: Department of Economics, Lahore Leads University, Lahore, Pakistan.
Huma Sohaib: Department of Economics, Lahore Leads University, Lahore, Pakistan.
Muhammad Azhar Khan: Department of Economics, Lahore Leads University, Lahore, Pakistan.

International Journal of Energy Economics and Policy, 2014, vol. 4, issue 4, 610-620

Abstract: Energy consumption is a key factor in economic activity. To ascertain its role in economic growth, this study empirically investigates its role for Asian countries. Price index is also included in analysis as factor of economic growth. We examine and quantify this long run relationship for a sample of selected Asian countries with data on relevant variables for a large time dimension (1970 to 2012). Econometric precision is brought by using pooled mean group (PMG) besides other Pedroni, Kao and Westerlund panel cointegration tests. PMG being heterogeneous panels estimation technique allows the slope and short run parameters to vary across the countries. Structural breaks are also incorporated to observe the impact of shocks that leave permanent effect on national income. Results show the presence of long run relationship between energy consumption and national income. The positive contribution of energy consumption is quantified using Fully Modified OLS and dynamic OLS as well. Policy recommendations are made on the basis of empirical analysis.

Keywords: Energy consumption; National income; Price index; Pedroni Cointegration; Kao Cointegration; Westerlund Test; Structural breaks (search for similar items in EconPapers)
JEL-codes: C23 E31 E39 P44 Q43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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