Kumar, Saten and Shahbaz, Muhammad (2010): Coal Consumption and Economic Growth Revisited: Structural Breaks, Cointegration and Causality Tests for Pakistan.
Download (260kB) | Preview
A global profusion of coal provides many countries with opportunities for economic growth. The direction of causality between coal consumption and economic growth is useful for policy making, however, existing empirical evidence have failed to reach a consensus. This paper examined the liaison between coal consumption and economic growth for Pakistan over the period 1971-2009. The endogenous two-break LM unit test, derived in Lee and Strazicich (2003), is used to assess the order of integration of the variables and structural breaks in the data series. Application of the Autoregressive Distributed Lag (ARDL) bounds test reveals a cointegrating relationship between real income, real capital stock, labour and coal consumption, and further application of General to Specific (GETS), Engle and Granger (EG), Stock Watson’s Dynamic Ordinary Least Squares (DOLS) and Phillip Hansen’s Fully Modified Ordinary Least Squares (FMOLS) methods show statistical robustness of the estimates. The elasticity with respect to coal consumption is positive and significant. The Vector Error Correction Model (VECM) based Granger causality test is also applied for both short-and long-run situations.
|Item Type:||MPRA Paper|
|Original Title:||Coal Consumption and Economic Growth Revisited: Structural Breaks, Cointegration and Causality Tests for Pakistan|
|English Title:||Coal Consumption and Economic Growth Revisited: Structural Breaks, Cointegration and Causality Tests for Pakistan|
|Keywords:||Coal consumption; economic growth; cointegration; Granger causality|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General
|Depositing User:||Saten Kumar|
|Date Deposited:||29. Oct 2010 11:50|
|Last Modified:||13. Feb 2013 03:34|
Apergis, N. and Payne, J.E. (2010a) ‘Energy consumption and economic growth: evidence from a panel of OECD countries,’ Energy Policy, 38, 1353-1359.
Apergis, N. and Payne, J.E. (2010b) ‘Coal consumption and economic growth: evidence from the commonwealth of independent states,’ Energy Policy, 38, 650-655.
Aqeel, A and M.S. Butt (2001) ‘The relationship between energy consumption and economic growth in Pakistan,’ Asia-Pacific Development Journal, 8, 101-109.
Beaudreau, B. (2005) ‘Engineering and economic growth,’ Energy Economics, 16, 211–220.
Chary, S.R. and Bohara, A.K. (2010) ‘Energy consumption in Bangladesh, India and Pakistan: cointegration analysis,’ The Journal of Developing Areas, 44, 41-50.
Fatai, K., Oxley, L. and Scrimgeour, F.G. (2004) ‘Modelling the causal relationship between energy consumption and GDP in New Zealand, Australia, India, Indonesia, the Philippines, and Thailand,’ Mathematics and Computers in Simulation, 64, 431–445.
Ghali, K.H. and El-Sakka, M.I.T. (2004) ‘Energy consumption and output growth in Canada: a multivariate cointegration analysis,’ Energy Economics, 26, 225–238.
Gregory, A. W. and Hansen, B. E. (1996a) ‘Residual-based tests for cointegration in models with regime shifts,’ Journal of Econometrics, 70, 99-126.
Gregory, A. W. and Hansen, B. E. (1996b) ‘Tests for cointegration in models with regime and trend shifts,’ Oxford Bulletin of Economics and Statistics, 58, 555-559.
Hu, J.L. and Lin, C.H. (2008) ‘Disaggregated energy consumption and GDP in Taiwan: a threshold co-integration analysis,’ Energy Economics, 30, 2342–2358.
Jin-ke, L., Hualing, S. and Dianming, G. (2008) ‘Causality relationship between coal consumption and GDP: difference of major OECD and non-OECD countries,’ Applied Energy, 85, 421–429.
Jin-ke, L., Feng-hua, W. and Hua-ling, S (2009) ‘Differences in coal consumption patterns and economic growth between developed and developing countries,’ Procedia Earth and Planetary Science, 1, 1744-1750.
Khan, A.A. and Ahmed, U. (2009) ‘Energy demand in Pakistan: A disaggregate analysis,’ The Pakistan Development Review, 4, 1-27.
Khan, M.A. and Qayyum, A. (2009) ‘The demand for electricity in Pakistan,’ OPEC Energy Review, 33, 70-96.
Kumar, S., Webber, D. and Fargher, S. (2010a) ‘Wagner’s Law revisited: cointegration and causality tests for New Zealand,’ forthcoming Applied Economics.
Kumar, S., Fargher, S. and Webber, D. (2010b) ‘Testing the validity of the Feldstein-Horioka puzzle for Australia,’ forthcoming Applied Economics.
Lee, C.C. and Chang, C.P. (2005) ‘Structural breaks, energy consumption and economic growth revisited: evidence from Taiwan,’ Energy Economics, 27, 857–872.
Lee, C.C. and Chiang, C. (2008) ‘Energy consumption and economic growth in Asian countries: a more comprehensive analysis using panel data,’ Resource and Energy Economics, 30, 50–65.
Lee, J. and Strazicich, M.C. (2003) ‘Minimum Lagrange multiplier unit root test with two structural breaks,’ Review of Economics and Statistics, 85, 1082-89.
Lee, J. and Strazicich, M.C. (2004) ‘Minimum LM unit root test with one structural break,’ Manuscript, Department of Economics, Appalachian State University.
Liu, W., Wu, J, Yang, K. and Hi, G. (2009) ‘Econometric analysis to the coal consumption and economic growth in China,’ Power and Energy Engineering Conference 2009, Wuhan, China.
Masih, A.M.M. and Masih, R. (1996) ‘Energy consumption, real income and temporal causality: results from a multi-country study based on cointegration and error-correction modelling techniques,’ Energy Economics, 18, 165-183.
Pesaran, M.H., Shin, Y. and Smith, R.J. (2001) ‘Bounds testing approaches to the analysis of level relationships’, Journal of Applied Econometrics, 16, 289–326.
Toda, H.Y. and Yamamoto, T. (1995) ‘Statistical inference in vector autoregressions with possibly integrated process,’ Journal of Econometrics, 66, 225–250.
Sari, R. and Soytas, U. (2004) ‘Disaggregate energy consumption, employment, and income in Turkey,’ Energy Economics, 26, 335–344.
Sari, R. and Soytas, U. (2007) ‘The growth of income and energy consumption in six developing countries,’ Energy Policy, 35, 889–898.
Siddiqui, R. (2004) ‘Energy and economic growth in Pakistan,’ The Pakistan Development Review, 43, 175-200.
Stern, D.I. (2000) ‘A multivariate cointegration analysis of the role of energy in the US macroeconomy,’ Energy Economics, 22, 267–283.
Yang, H.Y. (2000a) ‘Coal consumption and economic growth in Taiwan,’ Energy Sources, 22, 109–115.
Yang, H.Y. (2000b) ‘A note on the causal relationship between energy and GDP in Taiwan,’ Energy Economics, 22, 309–317.
Yoo, S.H. (2006) ‘Causal relationship between coal consumption and economic growth in Korea,’ Applied Energy, 83, 1181–1189.
Yuan, J.H., Kang, J.G., Zhao, C.H. and Hu, Z.G. (2008) ‘Energy consumption and economic growth: evidence from China at both aggregated and disaggregated levels,’ Energy Economics, 30, 3077–3094.
Wolde-Rufael, Y. (2004) ‘Disaggregated industrial energy consumption and GDP: the case of Shanghai 1952–1999,’ Energy Economics, 26, 69–75.
Wolde-Rufael, Y. (2008) ‘The long-run relationship between petroleum imports and economic growth: the case of Cyprus,’ Resources, Energy and Development, 5, 95–103.
Wolde-Rufael, Y. (2010) ‘Coal consumption and economic growth revisited,’ Applied Energy, 87, 160–167.
Zahid, A, (2008) ‘Energy-GDP relationship: A causal analysis for the five countries of South Asia,’ Applied Econometrics and International Development, 8, 167-180.
Zhang, Y. and Li, W. (2007) ‘Study on causal relationship between coal consumption and economic growth in China,’ Resources & Industries, 9, 89–93.
Ziramba, E. (2009) ‘Disaggregate energy consumption and industrial production in South Africa,’ Energy Policy, 37, 2214–2220.