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

Abbas Ali Chandio, Abdul Rauf, Yuansheng Jiang, Ilhan Ozturk and Fayyaz Ahmad
Additional contact information
Abbas Ali Chandio: College of Economics, Sichuan Agricultural University, Chengdu 611130, China
Abdul Rauf: School of Economics and Management, Southeast University, Nanjing 211189, Jiangsu, China
Yuansheng Jiang: College of Economics, Sichuan Agricultural University, Chengdu 611130, China
Fayyaz Ahmad: School of Economics, Lanzhou University, Lanzhou 730000, Gansu, China

Sustainability, 2019, vol. 11, issue 17, 1-18

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.

Keywords: economic growth; industrial electricity consumption; industrial oil consumption; industrial gas consumption; Pakistan (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://www.mdpi.com/2071-1050/11/17/4546/pdf (application/pdf)
https://www.mdpi.com/2071-1050/11/17/4546/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:11:y:2019:i:17:p:4546-:d:259712

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().