An econometric modelling of financial development-aggregate energy consumption nexus for Ghana

Yeboah Asuamah, Samuel (2017): An econometric modelling of financial development-aggregate energy consumption nexus for Ghana.

Abstract

The study modelled the long run and short run link between financial development and aggregate energy consumption in Ghana for the period 1970 to 2011 using Autoregressive Distributed Lad Model (ARDL). The results produced significant evidence of cointegration between the variables. The results seem to suggest that financial development is a key explanatory variable in aggregate energy consumption. Financial development is recommended as a policy tool to manage energy consumption. Causality issues as well as the effect of structural breaks in modelling should be the subject of future research.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial development; Aggregate energy consumption; Long run
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P28 - Natural Resources ; Energy ; Environment; P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy ; Legal Institutions ; Property Rights ; Natural Resources ; Energy ; Environment ; Regional Studies

References

Abosedra, S., & Baghestani, H. (1989). New evidence on the causal relationship between United States Energy Consumption and Gross National Product. Journal of Energy and Development, 14(5), 285-292.

Acaravci, A., & Ozturk, I. (2012). Electricity Consumption and Economic Growth Nexus: A Multivariate Analysis for Turkey. Amfiteatru Economic, 14(31), 246-257.

Alam, M. S. (2006). Economic Growth with Energy, MPRA Paper, No. 1260.

Bartleet, M., Gounder, R. (2010). Energy Consumption and Economic Growth in New Zealand: Results of Trivariate and Multivariate Models. Energy Policy, 38(7), 3505-3517.

Dan. Y., & Lijun, Z. (2009). Financial Development and Energy Consumption: An Empirical Research Based on Guangdong Province. Paper presented at International Conference on Information Management, Innovation Management, and Industrial Engineering, 2009, ICIII, 3, 102- 105.

Dickey, D. A., & Fuller, W. A. (1979). "Distribution of the Estimators for Autoregressive Time Series with a Unit Root". Journal of the American Statistical Association, 74(366), 427-431.

Dickey, D. A., & Fuller, W. A. (1981). Likelihood Ratio Statistics For Autoregressive Time Series With A Unit Root. Econometrica, 49(4), 1057-1072.

Faridul, I., Muhammad, S., & Mahmudul, A. (2011). Financial Development and Energy Consumption Nexus in Malaysia: A Multivariate Time Series Analysis. Munich Personal RePEc Archive, 1-29. Online at http://mpra.ub.uni-muenchen.de/28403/ MPRA Paper No. 28403.

Huang, B., Hwang, N., & Yang, C. W. (2008). Causal Relationship between Energy Consumption and GDP Growth Revisited: a Dynamic Panel Data Approach. Ecological Economics, 6(7), 41-54.

Kakar, Z. K., Khilji, B. A., & Khan., M. J. (2011). Financial Development and Energy Consumption: Empirical Evidence from Pakistan. International Journal of Trade, Economics, and Finance, 2(6), 469-471.

Kahsai, M. S., Nondo, C., Schaeffer, P. V., & Gebremedhin, T. G. (2010). “Does Level of Income Matter in the Energy Consumption and GDP Nexus: Evidence from Sub-Saharan African Countries”. Research Paper#7, Research Institute, West Virginia University.

Kraft, J., & Kraft, A. (1978). On the Relationship between Energy and GNP. Journal of Energy and Development, 3(2), 401-403.

Kwiatkowski, D., Phillips, P. C. B., Schmidt, P., & Shin, Y., (1992). Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root: How sure are we that Economic Time Series have a Unit Root? Journal of Econometrics, 54(1-3), 159-178.

Mehrara, M., & Musai, M. (2012). Energy Consumption, Financial Development, and Economic Growth: An ARDL Approach for the Case of Iran. International Journal of Business and Behavioral Sciences, 2(6), 92-99.

Pesaran, H. M., & Shin, Y. 1(999). Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. in: S. Storm, ed. 1999. Econometrics and Economic Theory in the 20th 10 Century: The Ragnar Frisch Centennial Symposium. Cambridge: Cambridge University Press. Ch. 11.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16(3), 289-326.

Sadorsky, P. (2010). The Impact of Financial Development on Energy Consumption in Emerging Economies. Energy Policy, 38(5), 2528-2535.

Shahbaz, M., Tang, C. F., & Shahbaz S. M. (2011). Electricity Consumption and Economic Growth Nexus in Portugal Using Cointegration and Causality Approaches. Energy Policy, 39(6), 3529-3536.

Stern, D. I. (2000). A Multivariate Cointegration Analysis of the Role of Energy in the U.S. Macroeconomy. Energy Economics 22(2), 267-283.

Stern, D. (2004). The Rise and Fall of the Environmental Kuznets Curve. World Development, 32(8), 1419-1439.

Wolde-Rufael, Y. (2004). Disaggregated energy consumption and GDP, the experience of Shangai 1952-1999. Energy Economics 26(1), 69-75.

World Energy Outlook, 2012

Yu, E. S. H., & Hwang, B. (1984). The relationship between energy and GNP: Further results. Energy Economics, 6(3), 186-190.