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Energy Conservation Policies, Growth and Trade Performance: Evidence of Feedback Hypothesis in Pakistan

Raza, Syed Ali and Shahbaz, Muhammad and Nguyen, Duc Khuong (2014): Energy Conservation Policies, Growth and Trade Performance: Evidence of Feedback Hypothesis in Pakistan.

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Abstract

This study investigates the relationship between energy consumption and trade openness in Pakistan by using the annual time series data for the period of 1973-2011. Our main results show: i) the presence of long-run link between energy consumption and trade performance; ii) positive impact of gross domestic product, exports, and imports on energy consumption; iii) bidirectional causal relationship between exports and energy consumption, and also be-tween imports and energy demand; and iv) bidirectional causality between gross domestic product and energy consumption points to the presence of feedback hypothesis in Pakistan. We therefore note that energy conservation policies will reduce the trade performance which in turn leads to the decline in economic growth in Pakistan. The present study may guide policymakers in formulating a conclusive energy and trade policies for sustainable growth for long span of time.

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