Investigating the Interactive Role of Demand Side Factors Potentially Responsible for Energy Crisis in Pakistan

Sohail Amjed, Iqtidar Ali Shah and Adnan Riaz
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Sohail Amjed: Department of Business Administration, University of Technology and Applied Sciences, Sultanate of Oman.
Iqtidar Ali Shah: Department of Business Administration, Yorkville University, British Columbia, Canada
Adnan Riaz: Department of Business Administration, Allama Iqbal Open University Islamabad, Pakistan.

International Journal of Energy Economics and Policy, 2022, vol. 12, issue 3, 236-246

Abstract: This paper attempts to investigate the dynamic relationship among Energy Consumption (E), Financial System Development (F), Industrailization (I), Agriculture Development (A) and Economic Growth (Y) in case of Pakistan for the period 1971-2018 by using cointegration approach. After confirming the level of stationarity, the presence of long run relationship among the series was tested through newly developed combined cointegration approach in addition to ARDL bound testing with structural break dummy. The short run and long run parameter coefficients were estimated by unrestricted error correction model (UECM) because all the series are found stationary at 1st difference I(1) and sufficient evidence of cointegration. Finally, the direction of causality among the considered variables was achieved through Granger causality test within the framework of VECM. The long run parameter coefficient estimates by UECM indicate that financial development, industrialization, economic growth and decrease in agricultural contribution to GDP induce electricity consumption in Pakistan. We also found that a long-run unidirectional causality is running from the economic growth to electricity consumption which favors the electricity conservation hypothesis in case of Pakistan. The causality running from the electricity consumption to agriculture output coupled with negative parameter coefficient value suggests that electric power deficit is responsible for hampering the agricultural growth in Pakistan. The study suggests that electricity conservation policy in addition to prudent rationing of electric power among the various sectors may greatly contribute to minimize the adverse effects of energy crisis in Pakistan.

Keywords: Financial Development; Industrialization; Agriculture Development; Economic Growth; Energy Crises; Pakistan (search for similar items in EconPapers)
JEL-codes: F43 G00 O14 Q18 Q43 (search for similar items in EconPapers)
Date: 2022
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