Causal linkages between electricity consumption and GDP in Thailand: evidence from the bounds test

Jiranyakul, Komain (2014): Causal linkages between electricity consumption and GDP in Thailand: evidence from the bounds test.

Abstract

This paper investigates the causal relationship between electricity consumption and real GDP by applying the bounds testing for cointegration in a multivariate framework. The error correction mechanism is employed to detect causal relationship in the presence of cointegration among three variables. Empirical results for Thailand during 2001Q1 and 2014Q2 suggest that there is long-run bidirectional causality between electricity consumption and real GDP. The source of causation in the long run is found by the significance of the error correction terms in both directions. In the short-run dynamics analysis, the positive relationship between electricity consumption and economic growth is not observed. The findings give implications for electricity efficiency and alternative energy sources in the long run.

• Item Type: MPRA Paper
• Language: English
• Keywords: Causality, electricity consumption, economic growth
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

References

Asafu-Adjaye, J., 2000. “The relationship between energy consumption, energy prices, and economic growth: time series evidence from Asian developing countries,” Energy Economics, 22(), 615-625.

Chandran, V. G. R., Shama, S., and Madhavan, K., 2010. “Electricity consumption-growth nexus: the case of Malaysia,” Energy Policy, 38(1), 606-612.

Chen, S. T., Kou, H. I., and Chen, C.C., 2007. “The relationship between GDP and electricity consumption in 10 Asian countries,” Energy Policy, 35(4), 2611-2621.

Faisal, A., and Nirmalya, C., 2013. “Electricity consumption-economic growth nexus: an aggregated and disaggregated causality analysis in India and Pakistan,” Journal of Policy Modeling, 35(4), 538-553.

Ghosh, S., 2002. “Electricity consumption and economic growth in India,” Energy Policy, 30(2), 125-129.

Glasure, Y. U., and Lee, A. R., 1997. “Cointegration, error-correction, and the relationship between GDP and energy: the case of South Korea and Singapore,” Resource and Energy Economics, 20(), 17-25.

Halkos, G. E., and Tzeremes, N. G., 2014. “The effect of electricity consumption from renewable sources on countries’ economic growth levels: evidence from advanced, emerging and developing economies,” Renewable and Sustainable Energy Reviews, 39(C), 166-173.

Ho, C. Y., and Siu, K. W., 2007. “A dynamic equilibrium of electricity consumption and GDP in Hong Kong: an empirical investigation,” Energy Policy, 35(4), 2507-2513.

Narayan, P. K., and Smyth, R., 2009. “Multivariate Granger causality between electricity consumption, exports and GDP: evidence from a panel of Middle Eastern countries,” Energy Policy, 37(1), 299-236.

Oh, W., and Lee, K., 2004. “Causal relationship between energy consumption and GDP revisited: the case of Korea, 1970-1999,” Energy Economics, 26(1), 51-59.

Pesaran, M. H., and Shin, Y., 1999. “An autoregressive distributed lag modeling approach to cointegration analysis,” Chapter 11 in Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Strom, S. (ed.) Cambridge University Press: Cambridge.

Pesaran, M. H., Shin, Y., and Smith, R. J., 2001. “Bounds testing approaches to the analysis of level relationships,” Journal of Applied Econometrics, 16(3), 289-326.

Phillips, P. C. B., and Perron, P., 1988. “Testing for a unit root in time series regression,” Biometrika, 75(2), 335-346.

Sami, J., 2011. “Multivariate cointegration and causality between exports, electricity consumption and real income per capita: recent evidence from Japan,” International Journal of Energy Economics and Policy, 1(3), 59-68.

Yoo, S-H., 2005. “Electricity consumption and economic growth: evidence from Korea,” Energy Policy, 33(12), 1637-1632.