The Energy-Growth Nexus in Thailand: Does Trade Openness Boost up Energy Consumption?

Kyophilavong, Phouphet and Shahbaz, Muhammad and Anwar, Sabeen and Masood, Sameen (2015): The Energy-Growth Nexus in Thailand: Does Trade Openness Boost up Energy Consumption?

Abstract

The nexus between trade openness and energy demand is hot topic of discussion among academicians and researchers, and numerous studies are available in existing literature while investigating the nexus between trade openness and energy demand. This paper explores the relationship between energy consumption, trade openness and economic growth in case of Thailand. In doing so, we have applied Bayer and Hanck cointegration approach to test whether the long run relationship exists between the variables. Our results confirm the presence of cointegration between the variables. Energy consumption stimulates economic growth. Trade openness adds in economic growth. The causality analysis reveals that energy consumption Granger causes economic growth and in resulting, economic growth Granger causes energy consumption. Trade openness and energy consumption are interdependent i.e. trade openness Granger causes energy consumption and in return, energy consumption Granger causes trade openness. This paper openness up new directions for policy making authorities in Thailand to design a comprehensive energy and trade policies to sustain economic growth for long run.

• Item Type: MPRA Paper
• Language: English
• Keywords: Energy, Trade, Growth, Thailand
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling

References

Ozturk I, Acaravci A. Electricity consumption and real GDP causality nexus: Evidence from ARDL bounds testing approach for 11 MENA countries, Applied Energy 2011; 88: 2885-2892.

Ozturk I. A survey of energy-growth nexus. Energy Policy 2010; 38: 340-349.

Payne JE. A survey of the electricity consumption-growth literature. Applied Energy 2010; 87(3): 723-731.

Sahid E.JM, Isa AM, Leong YP, Shi X. Rational for ASEAN energy market integration (AEMI) in AEMI Group eds, ASEAN energy market integration (AEMI): From coordination to integration. ASEAN Studies Center, Chulalongkorn University 2013.

Promjiraprawat K, Limmeechokchai B. Assessment of Thailand’s energy policies and CO2 emission: Analysises of energy efficiency measures and renewable power generation, energies 2012; 5: 3074-3093.

Institute of Energy Economics (IEE). The ASEAN center for energy, and energy supply security planning for the ASEAN, the Second ASEAN energy demand outlook, Paper for the ASEAN SOE Leader and the Ministry of the Economy, Trade and Industry, Japan 2009.

Sawangphol N, Pharino C. Status and outlook for Thailand’s low carbon electricity development, Renewable and Sustainable Energy Reviews 2011; 15: 564-573.

Warr, P. Thailand beyond the Crisis, London: Routledge 2005.

Arouri, M., Shahbaz M, Onchang R, Islam F. and Teulon, F. Environmental Kuznets Curve in Thailand: Cointegration and Causality Analysis. Journal of Energy and Development 2014; 39, 149-170.

Hasanbeigi, A., Menke, C., Pont, P. D. Barriers to energy efficiency improvement and decision-making behavior in Thai industry. Energy Efficiency 2010; 3, 33-52.

Jarvis, D. S. L. Risk regulation and governance: Institutional processes and political risk in the Thai energy sector. Lee Kuan Yew School of Public Policy Research Paper Series 2009, National University of Singapore (NUS).

Tharnpanich N, McCombie JSL. Balance-of-payments constrained growth, structural change, and the Thai economy. Journal of Post Keynesian Economics 2013; 35(4): 569-597.

Kuo, K. C., Lai, S. L., Chancham, K. and Liu, M. Energy Consumption, GDP, and Foreign Direct Investment in Germany. Applied Mechanics and Materials 2014; 675-677.

Yoo SH. The causal relationship between electricity consumption and economic growth in the ASEAN countries. Energy Policy 2006; 34: 3573-3582.

Omri, A. (2014). An international literature survey on energy-economic growth nexus: Evidence from country-specific studies. Renewable and Sustainable Energy Reviews, 38, 951–959.

Farhani, S. Rejeb JB. Energy consumption, economic growth and CO2 emissions: Evidence from panel data for MENA region. International Journal of Energy Economics and Policy 2012; 2(2): 71-81.

Akkemik KA, Göksal, K. Energy consumption-GDP nexus: Heterogeneous panel causality analysis. Energy Economics 2012; 34: 865-873.

Apergis N, Payne JE. Energy consumption and growth in South America: Evidence from a panel error correction model. Energy Economics 2010; 32: 1421-1426.

Jinke L, Hualing S, Dianming G. Causality relationship between coal consumption and GDP: difference of major OECD and on-OECD countries. Applied Energy 2008; 85(6): 421-429.

Apergis N, Payne JE. Renewable and non-renewable energy consumption-growth nexus: Evidence from a panel error correction model. Energy Economics 2012; 34(3): 733-738.

Pedroni P. Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory 2004; 20(03): 597-625.

Tugcu CT, Ozturk I, Aslan A. Renewable and Non-Renewable Energy Consumption and Economic Growth Relationship Revisited: Evidence from G7 Countries. Energy Economics 2012; 34(6): 1942–1950.

Hatemi JA. Asymmetric causality tests with an application. Empirical Economics 2012; 43(1): 447-456.

Kahsai MS, Nondo C, Schaeffer PV, Gebremedhin TG. Income level and the energy consumption-GDP nexus: Evidence from Sub-Saharan Africa. Energy Economics 2012; 34(3): 739-746.

Ouedraogo NS. Energy consumption and economic growth: Evidence from the economic community of West African states (ECOWAS). Energy Economics 2013; 36: 637-647.

Johansen S, Juselius K. Maximum likelihood estimation and inference on cointegration with applications to the demand for money. Oxford Bulletin of Economics and Statistics 1990; 52(2): 169-210.

Hossein A, Yazdan GF, Ehsan AG. The relationship between energy consumption, energy prices and economic growth: case study (OPEC countries). OPEC Economic Review 20123; 6(3): 272-286.

Coers, R. and Sanders, M. The energy–GDP nexus; addressing an old question with new methods, Energy Economics 2013; 36: 708-715.

Chontanawat J, Hunt LC, Richard P. Does energy consumption cause economic growth? Evidence from a systematic study of over 100 countries. Journal of Policy Modeling 2008; 30(2): 209-220.

Glasure YU, Lee A-R. Cointegration, error-correction, and the relationship between GDP and energy: The case of South Korea and Singapore. Resource and Energy Economics 1997; 20: 17-25.

Stern DI. A multivariate cointegration analysis of the role of energy in the US macroeconomy. Energy Economics 2000; 22: 267-283.

Aqeel A, Butt MS. The relationship between energy consumption and economic growth in Pakistan. Asia-Pacific Development Journal 2001; 8: 101-110.

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

Glasure YU. Energy and national income in Korea: further evidence on the role of omitted variables. Energy Economics 2002; 24: 355-365.

Sari R, Ewng BT, Soytas U. The relationship between disaggregate energy consumption and industrial production in the United States: An ARDL approach. Energy Economics 2008; 30: 2302-2313.

Belloumi M. Energy consumption and GDP in Tunisia: Cointegration and causality analysis. Energy Policy 2009; 37: 2745-2753.

Yuan C, Liu S, Fang Z, Xie N. The relation between Chinese economic development and energy consumption in the different periods. Energy Policy 2010; 38: 5189-5198.

Tsani ST. Energy consumption and economic growth: A causality analysis for Greece. Energy Economics 2010; 32: 582-590.

Wang Y, Wang Y, Zhou X, Lu G. Energy consumption and economic growth in China: A multivariate causality test. Energy Policy 2011; 39(7): 4399-4406.

Dagher L, Yacoubian T. The causal relationship between energy consumption and economic growth in Lebanon. Energy Policy 2012; 50: 795-801.

Eddrief-Cherfi S, Kourbali B. Energy consumption and economic growth in Algeria: Cointegration and causality analysis. International Journal of Energy Economics and Policy 2012; 2: 238-249.

Stern DI, Enflo K. Causality between energy and output in the long-run. Energy Economics 2013; 39: 135-146.

Saatci M, Dumrul Y. The relationship between energy consumption and economic growth: Evidence from a structural break analysis for Turkey. International Journal of Energy Economics and Policy 2013; 3: 20-29.

Dergiades T, Martinopoulos G, Tsoulfidis L. Energy consumption and economic growth: Parametric and non-parametric causality testing for the case of Greece. Energy Economics 2013; 36: 686-697.

Baranzini A, Weber S, Bareit M, Mathys NA. The causal relationship between energy use and economic growth in Switzerland. Energy Economics 2013; 36: 464-470.

Kocaaslan OK. The causal link between energy and output growth: Evidence from Markov switching Granger causality. Energy Policy 2013; 63: 1196-1206.

Ocal, O. and Aslan, A. Renewable energy consumption–economic growth nexus in Turkey. Renewable and Sustainable Energy Reviews 2014; 28, 494-499.

Maamar, S. and Ousama, B-S. On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: Fresh evidence from BRICS countries. Renewable and Sustainable Energy Reviews 2014; 39: 14-23.

Hassaballa, H. Testing for Granger causality between energy use and foreign direct investment Inflows in developing countries. Renewable and Sustainable Energy Reviews 2014; 31: 417-426.

Menegaki, A. N. On energy consumption and GDP studies; A meta-analysis of the last two decades. Renewable and Sustainable Energy Reviews 2014; 29: 31-36.

Shahbaz M, Nasreen S, Ling CH, Sbia R. Causality between trade openness and energy consumption: What causes what in high, middle and low income countries. Energy Policy 2014a; 70: 126–143.

Nasreen S, Anwer S. Causal relationship between trade openness, economic growth and energy consumption: A panel data analysis in Asian countries. Energy Policy 2014; 69: 82-91.

Sbia R, Shahbaz M, Hamdi H. A contribution of foreign direct investment, clean energy, trade openness, carbon emissions and economic growth to energy demand in UAE. Economic Modelling 2014; 36: 191-197.

Farhani S, Shahbaz M, Arouri M, Teulon, F. The role of natural gas consumption and trade in Tunisia’s output. Energy Policy 2010; 66: 677-684.

Shahbaz M, Khan, S, Tahir MT. The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis. Energy Economics 2013a; 40: 8-21.

Shahbaz M, Hooi HL, Farooq A. Natural gas consumption and economic growth in Pakistan. Renewable and Sustainable Energy Reviews 2013b; 18: 87-94.

Nnaji CE, Chukwu J, Nnaji OM. Does domestic energy consumption contribute to exports? Empirical evidence from Nigeria. International Journal of Energy Economics and Policy 2013; 3: 297-306.

Katircioglu, T. S. Interactions between energy and imports in Singapore: Empirical evidence from conditional error correction models. Energy Policy 2013; 63: 514-520.

Ghani, G. M. Does trade liberalization effect energy consumption? Energy Policy 2012; 43: 285-290.

Sadorsky P. Energy consumption, output and trade in South America. Energy Economics 2001; 34: 476-488.

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

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

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

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.

Sami J, Makun KM. The relationship between exports, electricity consumption and economic growth: empirical evidence from Brazil. World Review of Business Research 2011; 1: 28-37.

Sultan R. An econometric study of aggregate output, energy and exports in Mauritius-Implications for trade and climate policy. University of Mauritius, Reduit, Mauritius 2011.

Lean HH, Smyth R. On the dynamics of aggregate output, electricity consumption and exports in Malaysia: Evidence from multivariate Granger causality tests. Applied Energy 2010a; 87: 1963-1971.

Lean HH, Smyth R. Multivariate Granger causality between electricity generation, exports, prices and GDP in Malaysia. Energy 2010b; 35: 3640-3648.

Narayan PK, 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.

Lutkepohl H. Non-causality due to omitted variables. Journal of Econometrics 1982; 19: 367–378.

Shahbaz M. Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan. Economic Modelling 2012; 29: 2325-2339.

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

Engle RF, Granger CW. Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica: Journal of the Econometric Society 1987; 251-276.

Johansen S. Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models, Econometrica: Journal of the Econometric Society 1991; 1551-1580.

Johansen S. Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control 1988; 12(2-3): 231-254.

Phillips PC, Ouliaris S. Asymptotic Properties of Residual Based Tests for Cointegration. Econometrica: Journal of the Econometric Society 1990; 165-193.

Peter Boswijk H. Testing for an unstable root in conditional and structural error correction models. Journal of econometrics 1994; 63(1): 37-60.

Banerjee A, Dolado J, Mestre R. Error‐correction mechanism tests for cointegration in a single‐equation framework. Journal of time series analysis 1998; 19(3): 267-283.

Bayer C, Hanck C. Combining Non‐Cointegration Tests. Journal of Time Series Analysis 2013; 34(1): 83-95.

Shahbaz, M., Tiwari, A. K. Ozturk, I. and Farooq. A. Are fluctuations in electricity consumption per capita transitory? Evidence from developed and developing economies. Renewable and Sustainable Energy Reviews 2013c; 28: 551–55.

Shahbaz, M. Tiwari, A. K., Jam, F. A. and Ozturk, I. Are fluctuations in coal consumption per capita temporary? Evidence from developed and developing economies. Renewable and Sustainable Energy Reviews 2014c; 33: 96–101.

Shahbaz M, Uddin GS, Rehman I, Imran K. Industrialization, electricity consumption and CO2 emissions in Bangladesh. Renewable and Sustainable Energy Reviews 2014c; 31: 575–586.

Shan J. Does financial development ‘lead’ economic growth? a vector autoregression appraisal? Applied Economics 2005; 37: 1353-1367.

Pesaran MH, Shin Y. An autoregressive distributed-led modeling approach to cointegration analysis. In: Steinar Strom, editor. Econometrics and economic theory in the 20th century. The Ragnar Frisch centennial symposium. Cambridge: Cambridge University Press 1999.

Ibrahim MH. Sectoral effects of monetary policy: evidence from Malaysia. Asian Economic Journal 2005; 19: 83-102.

Yu, X. Regional cooperation and energy development in the Greater Mekong Sub-region. Energy Policy 2003; 31: 1221-124.

Karki, S. K., Mann, M. D., and Salehfar, H. Energy and environment in the ASEAN: Challengs and opportunities, Energy Policy 2005; 33: 499-509.

Ministry of Energy. National Energy Conservation Plan (2011-2030), Energy Policy and Planning Office, Ministry of Energy, Bangkok, Thailand. 2010.

Ministry of Energy. Thailand 15 Year Renewable Energy Development Plan (2008-2022), Energy Policy and Planning Office, Ministry of Energy, Bangkok, Thailand. 2008.