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Is there any long run Granger-causality between economic growth and energy consumption ? evidence from Singapore

Mahmood, Ilham and Masih, Mansur (2018): Is there any long run Granger-causality between economic growth and energy consumption ? evidence from Singapore.

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Abstract

The energy consumption and economic growth nexus has been an issue in energy economics in recent decades. Rapid technological advancement and the corresponding increase in energy demand compels countries worldwide to assess the defining crux between energy consumption and economic development prior to implementing socio-economic policies that may deter economic growth in the long-run. In an era of global warming, this is especially vital to countries implementing energy policies aimed at reducing the lingering effects of climate change. One such country is Singapore. A forerunning Asian Tiger, Singapore’s concerted efforts to monitor its commitment to reducing carbon emissions has the urban city-state in a position where it must understand the energy consumption and economic growth nexus before it can devise energy policies focused on preserving the global climate, while simultaneously ensuring its concerted efforts toward long-run stable economic growth remains unhindered. The purpose of this study is to evaluate the energy consumption and economic growth nexus in Singapore. The methodology of this study employs the Autoregressive Distributed Lag (ARDL) approach to cointegration as proposed by Pesaran et al. (2001), and extends existing literature via the application of this cointegrating approach as it is previously unused in similar case studies. Findings indicate that no long-run causality exists between economic growth and energy consumption in Singapore, therefore denoting the presence of a neutrality hypothesis in the country’s economy. This implies that Singapore’s government would not experience negative economic growth as a result of its targeted policies towards reducing energy consumption in the country, further enhancing its position as a member of the Doha Amendment to the Kyoto Protocol.

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