CAUSALITY AND DYNAMICS OF ENERGY CONSUMPTION AND OUTPUT: EVIDENCE FROM NON-OECD ASIAN COUNTRIES

Ruhul Salim, Shuddhasattwa Rafiq and A. F. M. Kamrul Hassan
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A. F. M. Kamrul Hassan: Curtin Business School, Curtin University of Technology

Journal of Economic Development, 2008, vol. 33, issue 2, 1-26

Abstract: This article examines the short-run and long-run causal relationship between energy consumption and output in six non-OECD Asian developing countries. Standard time series econometrics is used for this purpose. Based on cointegration and vector error correction modeling, the empirical result shows a bi-directional causality between energy consumption and income in Malaysia, while a unidirectional causality from output to energy consumption in China and Thailand and energy consumption to output in India and Pakistan. Bangladesh remains as an energy neutral economy confirming the fact that it is one of the lowest energy consuming countries in Asia. Both the generalized variance decompositions and the impulse response functions confirm the direction of causality in these countries. These findings have important policy implications for concerned countries. Countries like China and Thailand may contribute to the fight against global warming directly implementing energy conservation measures whereas India and Pakistan may focus on technological developments and mitigation policies. For Malaysia, a balanced combination of alternative policies seems to be appropriate.

Keywords: Energy Conservation; Cointegration; Error Correction Model; Generalized Variance Decompositions; Generalized Impulse Response Functions (search for similar items in EconPapers)
JEL-codes: C22 Q43 Q48 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (17)

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