Electricity Consumption and Economic Growth in Kazakhstan: Fresh Evidence from a Multivariate Framework Analysis

Saleheen, Khan and Farooq Ahmed, Jam and Muhammad, Shahbaz (2012): Electricity Consumption and Economic Growth in Kazakhstan: Fresh Evidence from a Multivariate Framework Analysis.

Abstract

This paper visits the relationship between electricity consumption and economic growth by incorporating trade openness, capital and labour in production function using annual data of Kazakhstan. We have applied the ARDL bounds testing and the VECM Granger causality approach to examine long run and causality relationship between the variables.

Our results confirm the existence of long run relationship among the series. The empirical evidence reveals that electricity consumption adds in economic growth. Trade openness stimulates economic growth. Capital and labour promote economic growth. The causality analysis finds electricity consumption Granger causes economic growth. The feedback effect exists between Trade and economic growth. This study opens new insights for policy makers to articulate comprehensive economic, trade and energy policy to sustain long run economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Electricity, Growth, Kazakhstan
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy

References

[1] Acaravci, A., Ozturk, I. Electricity consumption and economic growth nexus: A multivariate analysis for Turkey. Amfiteatru Economic 2012; 14: 246-257

[2] Akinlo, A. Electricity consumption and economic growth in Nigeria: Evidence from cointegration and co-feature analysis. Journal of Policy Modelling 2009; 31: 681-693.

[3] Altinay, G., Karagol, E. Electricity Consumption and Economic Growth: Evidence for Turkey. Energy Economics 2005; 27: 849–856.

[4] Aqeel, A., Butt, M. S. The Relationship between Energy Consumption and Economic Growth in Pakistan. Development Journal2001; 8: 101–110.

[5] Baum, C. F. A review of Stata 8.1 and its time series capabilities. International Journal of Forecasting 2004; 20: 151-161.

[6] Chandran, V. G. R., Sharma, S., Madhavan, K. Electricity consumption–growth nexus: The case of Malaysia. Energy Policy, 2010; 38: 606-612.

[7] Chen, S.T., Kuo, H., Chen, C. The relationship between GDP and electricity consumption in 10 Asian countries. Energy Policy 2007; 35: 2611-2621.

[8] Erkan, C., Mucuk, M., Uysal, D. The impact of energy consumption on exports: The Turkish case. Asian Journal of Business and Management 2010; 2: 17-23.

[9] Fatai, K., Oxley, L., Scrimgeour, F.G. Modelling the causal relationship betweenenergy consumption and GDP in New Zealand, Australia, India, Indonesia, the Philippines and Thailand. Mathematics and Computers in Simulation 2002; 64: 431-445.

[9] Ghali, K.H., El-Sakka, M.I.T. Energy use and output growth in Canada: A multivariate cointegration analysis. Energy Economics 2004; 26: 225-238.

[10] Ghosh, S. Electricity consumption and economic growth in India. Energy Policy 2002; 30: 125-129.

[11] Ghosh, S. Electricity supply employment and real GDP in India: evidence from cointegration and Granger-causality tests. Energy Policy 2009; 37: 2926-2929.

[12] Glasure, Y. Energy and national income in Korea: Further evidence on the role of omitted variables. Energy Economics 2002; 24: 355-365.

[13] Halicioglu, F. A dynamic econometric study of income, energy and exports in Turkey. Energy 2011; 36: 3348-3354.

[14] Halicioglu, F. Residential electricity demand dynamics in Turkey. Energy Economics 2007; 29: 199-210.

[15] Ho, C., Siu, K. A dynamic equilibrium of electricity consumption and GDP in Hong Kong: An empirical investigation. Energy Policy 2007; 35: 2507-2513.

[16] Hondroyiannis, G., Lolos, S., Papapetrou, E. Energy consumption and economic growth: Assessing the evidence from Greece. Energy Economics 2002; 24: 319-336.

[17] Hossain, M. S., Multivariate Granger causality between economic growth, electricity consumption, exports and remittances for the panel of three ASEAN countries. Global Journal of Management and Business Research 2012; 12: 40-54.

[18] Hu, J. L., Lin, C. H. Disaggregated energy consumption and GDP in Taiwan: A threshold co-integration analysis. Energy Economics 2008; 30: 2342-58.

[19] Jamil, F., Ahmad, E. The relationship between electricity consumption, electricity prices and GDP in Pakistan. Energy Policy 2010; 38: 6016-6025.

[20] Jumbe, C. Cointegration and causality between electricity consumption and GDP: Empirical evidence from Malawi. Energy Economics 2004; 26: 61-68.

[21] Kouakou, A. Economic growth and electricity consumption in Cote d’Ivoire: Evidence from time series analysis. Energy Policy 2011; 39: 3638-3644

[22] Kraft, J., Kraft, A. On the relationship between energy and GNP. Journal of Energy and Development 1978; 3: 401-403.

[23] Lean. H. H., Smyth, R. Multivariate granger causality between electricity generation, exports, prices and GDP in Malaysia. Energy 2010a; 35: 3640-3648.

[24] Lean. H. H., Smyth, R. On the dynamics of aggregate out, electricity consumption and exports in Malaysia: Evidence from multivariate Granger causality tests. Applied Energy 2010b; 87: 1963- 1971.

[25] Lorde, T., Kimberly, W., Brain, F. The importance of electrical energy for economic growth in Barbados. Energy Economics 2010; 32: 1411-1420.

[26] Lütkepohl, H. New Introduction to multiple time series analysis. 2005. Springer-Verlag, Berlin.

[27] Narayan, P. K. The saving and investment nexus for China: Evidence from co-integration tests. Applied Economics 2005; 37: 1979-1990.

[28] Narayan, P. K., Narayan, S. Are exports and imports cointegrated? Evidence from 22 least developed countries. Applied Economics Letters 2005; 12: 375-378.

[29] Narayan, P., Smyth, R. Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests. Energy Policy, 2005; 33:1109-1116.

[30] Narayan, P., Smyth, R. Multivariate Granger causality between electricity consumption, exports and GDP: Evidence from a panel of Middle Eastern countries. Energy Policy 2009; 37: 229-236.

[31] Nawaz, M., Sadaqat, M., Awan, N. W., Qureshi, M. Energy consumption and economic growth: A disaggregate approach. Asian Economic and Financial Review 2012; 2: 255-261.

[32] Odhiambo, N. Electricity consumption and economic growth in South Africa: A trivariate causality test. Energy Economics 2009a; 31: 635-640.

[33] Odhiambo, N. Energy consumption and economic growth nexus in Tanzania: An ARDL bounds testing approach. Energy Policy 2009b; 37: 617-622.

[34] Odiahmbo, N. Electricity consumption, labour force participation rate and economic growth in Kenya: An empirical investigation. Problems and Perspectives in Management 2010; 8: 31-38.

[35] Oh, W., Lee, K. Causal relationship between energy consumption and GDP: The case of Korea 1970-1999. Energy Economics 2004; 26: 51-59.

[36] Ouédraogo, I. Electricity consumption and economic growth in Burkina Faso: A cointegration analysis. Energy Economics 2010; 32: 524-531.

[37] Payne, J. On the dynamics of energy consumption and output in the US. Applied Energy 2009; 86: 575-577.

[38] Pesaran, M. H., Shin, Y. An autoregressive distributed-led modeling approach to cointegration analysis. In Econometrics and Economic Theory in the 20th Century. The Ragnar Frisch Centennial Symposium, ed. Steinar Strom. Cambridge: Cambridge University Press 1999.

[39] Pesaran, M., Shin, Y., Smith, R. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 2001; 16: 289-326.

[40] Phillips, P., Perron, P. Testing for a unit root in time series regressions. Biometrika 1988; 75: 335-346.

[41] Poveda, A. C., Martínez, C. I. P. Trends in economic growth, poverty and energy in Colombia: long-run and short-run effects. Energy System 2011; 28: 281-298.

[42] Sadorsky, P. Trade and energy consumption in the Middle East. Energy Economics, 2011; 33: 739-749.

[43] Sadorsky, P. Energy consumption, output and trade South America. Energy Economics 2012; 34: 476-488.

[44] Sami, J. Multivariate cointegration and causality between exports, electricity consumption and real income per capita: Recent evidence from Japan. International Journal of Energy Economics and Policy 2011; 1: 59-68.

[45] Sami. J., Makun, K. K. The relationship between exports, electricity consumption and economic growth: Empirical evidence from Brazil. World Review of Business Research 2011; 21: 28-37.

[46] Shahbaz, M. Lean, H. H., Farooq, A. Natural gas consumption and economic growth in Pakistan 2013; 18: 87-94.

[47] Shahbaz, M., Feridun, M. Electricity consumption and economic growth empirical evidence from Pakistan. Quality and Quantity 2012; 46: 1583-1599.

[48] Shahbaz, M., Lean, H. H. Does financial development increase energy consumption? The role of industrialization and urbanization in Tunisia. Energy Policy 2012a; 40: 473-479.

[49] Shahbaz, M., Lean, H. H. The dynamics of electricity consumption and economic growth: A revisit study of their causality in Pakistan. Energy 2012b; 39: 146-153.

[50] Shahbaz, M., Mutascu, M., Tiwari, A. K. Revisiting the relationship between electricity consumption, capital and economic growth: Cointegration and causality analysis in Romania. Romanian Journal of Economic Forecasting 2012b; 3: 97-120.

[51] Shahbaz, M., Tang, C. F., Shabbir, M. S., Electricity consumption and economic growth nexus in Portugal using cointegration and causality approaches. Energy Policy 2011; 39: 3529-3536.

[52] Shahbaz, M., Zeshan, M., Afza, T. Is energy consumption effective to spur economic growth in Pakistan? New evidence from bounds test to level relationships and Granger causality tests. Economic Modelling 2012a; 29: 2310–2319.

[53] Shiu, A., Lam, P.L. Electricity consumption and economic growth in China. Energy Policy 2004; 32: 47-54.

[54] Solarin, S. Electricity consumption and economic growth: Trivariate investigation in Botswana with capital formation. International Journal of Energy Economics and Policy 2011; 1: 32-46.

[55] Solarin, S., Bello, M. Multivariate causality test on electricity consumption, capital, labour and economic growth for Nigeria. Journal of Business and Economics 2011; 3: 1-29.

[56] Squalli, J. Electricity consumption and economic growth: Bounds and causality analyses for OPEC members. Energy Economics, 2007; 29: 1192–1205.

[57] Stern D. I. A multivariate cointegration analysis of the role of energy in the U.S. macroeconomy, Energy Economics 2000; 22: 267-283.

[58] Stern, D. I. Energy and Economic Growth. Department of Economics, Sage 3208, Rensselaer Polytechnic Institute 2003. 110 8th Street Troy, NY, 12180-3590, USA.

[59] Stern, D., A multivariate cointegration analysis of the role of energy in the US macroeconomy. Energy Economics 2000; 22: 267-283

[60] Sultan, R. An econometric study of economic growth, energy and exports in Mauritius: Implications for trade and climate policy. International Journal of Energy Economics and Policy 2011; 2: 225-237.

[61]. Tang, C, F., Tan, E. C. Electricity consumption and economic growth in Portugal: Evidence from a multivariate framework analysis. The Energy Journal 2012; 33: 23-48.

[62] Tang, C. F. A re-examination of the relationship between electricity consumption and economic growth in Malaysia. Energy Policy 2008; 36: 3067-3075.

[63] Wolde-Rufael,Y. Electricity consumption and economic growth: A time series experience for 17 African countries. Energy Policy 2006; 34: 1106-1114.

[64] World Bank. World Development Indicators on CD-ROM 2011. Washington, DC.

[65] Yang, H.Y. A note on the causal relationship between energy and GDP in Taiwan. Energy Economics 2000; 22: 309-317.

[66] Yoo, S., Electricity consumption and economic growth: Evidence from Korea. Energy Policy 2005; 33: 1627-1632.

[67] Yoo, S. The causal relationship between electricity consumption and economic growth in ASEAN countries. Energy Policy 2006; 34: 3573-3582.

[68] Yoo, S. Kwak, S., Electricity consumption and economic growth in seven South American countries. Energy Policy 2010; 34: 181- 188.

[69] Yuan, J., Zhao, C., Yu, S., Hu, Z. Electricity consumption and economic growth in China: Cointegration and co-feature analysis. Energy Economics 2007;29:1179-1191.

[70] Zivot, E., Andrews, D. Further evidence on the great crash, the oil price shock, and the unit root hypothesis. Journal of Business and Economic Statistics 1992; 10: 251-270.

[71] Dickey, D., Fuller, W.A. Distribution of the estimates for autoregressive time series with unit root. Journal of the American Statistical Association 1979; 74: 427-431.

[72] Ng, S., Perron, P. Lag length selection and the construction of unit root test with good size and power. Econometrica 2001; 69: 1519-1554.

[73] Karanfil, F. How many times again will we examine the energy–income nexus using a limited range of traditional econometric tools? Energy Policy 2009; 36: 3019-3025.