Electricity Consumption and Economic Growth: A Revisit Study of Their Causality in Malaysia
Abstract
The role of electricity towards the economy becomes crucial in many countries including in Malaysia. It becomes necessary to investigate whether electricity consumption contributes to economic growth in order to make appropriate energy policies. The purpose of this research is to examine the long run and causal relationships between electric power consumption and real GDP. This paper applies to the error-correction model. The results indicate that electricity consumption has a positive impact on economic growth. Besides that, there was unidirectional Granger causality running from electricity consumption to real GDP but not vice versa. This paper suggests that Malaysia is becoming an energy-dependent country. The government should emphasize on formulating energy strategies so as to avoid adverse effects on economic growth.
JEL Classification: C39, D19, O40
Keywords
References
Akinwale, Y., Jesuleye, O., & Siyanbola, W. (2013). Empirical Analysis of The Causal Relationship Between Electricity Consumption and Economic Growth in Nigeria. British Journal of Economics, Management & Trade, 3(3), 277–295.
Altinay, G., & Karagol, E. (2005). Electricity Consumption and Economic Growth: Evidence from Turkey. Energy Economics, 27, 849–856.
Ang, J. B. (2008). Economic Development, Pollutant Emissions and Energy Consumption in Malaysia. Journal of Policy Modelling, 30(2), 271–278. https://doi.org/10.1016/ j.polmod.2007.04.010
Asafu-Adjaye, J. (2000). The Relationship Between Energy Consumption, Energy Prices and Economic Growth: Time Series Evidence from Asian Developing Countries. Energy Economics, 22(6), 615–625. https://doi.org/10.1016/S0140-9833(00)00050-5
Aslan, A. (2014). Causality Between Electricity Consumption and Economic Growth in Turkey: An ARDL Bounds Testing Approach. Energy Sources, Part B: Economics, Planning, and Policy, 9(1), 25–31. https://doi.org/10.1080/15567241003681882
Aziz, A. A. (2011). On the Causal Links Between Energy Consumption and Economic Growth in Malaysia. International Review of Business Research Paper, 7(6), 180–189.
Bayar, Y. (2014). Electricity Consumption and Economic Growth in Emerging Economies. Journal of Knowledge Management, Economics, and Information Technology, 4(2), 1–18.
Bélaïd, F., & Abderrahmani, F. (2013). Electricity Consumption and Economic Growth in Algeria: A Multivariate Causality Analysis in The Presence of Structural Change. Energy Policy, 55, 286–295. https://doi.org/10.1016/j.enpol.2012.12.004
Chandran, V., Sharma, S., & Madhavan, K. (2010). Electricity Consumption-Growth Nexus: The Case of Malaysia. Energy Policy, 38(1), 606–612. https://doi.org/10.1016/j.enpol.2009.10.013
Cheng, B. S., & Lai, W. T. (1997). An Investigation of Cointegration and Causality Between Energy Consumption and Economic Activity in Taiwan. Energy Economics, 19(4), 435–444. https://doi.org/10.1016/S0140-9883(97)01023-2
Ciarreta, A., & Zarraga, A. (2010). Electricity Consumption and Economic Growth in Spain. Applied Economics Letters, 17(14), 1417–1421. https://doi.org/10.1080/13504850903018689
Erol, U., & Yu, E. S. H. (1987). Time Series Analysis of The Causal Relationships Between US Energy and Employment. Resources Energy, 9(1), 75–89. https://doi.org/10.1016/0165-0572(87)90024-7
Faisal, F., Tursoy, T., Resatoglu, N. G., & Berk, N. (2018). Electricity Consumption, Economic Growth, Urbanisation and Trade Nexus: Empirical Evidence from Iceland. Economic Research-Ekonomska Istraživanja, 31(1), 664–680. https://doi.org/10.1080/1331677X.2018.1438907
Gan, P. Y., & Li, Z. D. (2008). An Econometric Study on Long-term Energy Outlook and The Implications of Renewable Energy Utilization in Malaysia. Energy Policy, 36(2), 890–899. https://doi.org/10.1016/j.enpol.2007.11.003
Glasure, Y. U., & Lee B, A. R. (1997). Cointegration, Error-correction, and The Relationship Between GDP and Energy: The Case of South Korea and Singapore. Resource Energy Economics, 20(1), 17–25. https://doi.org/10.1016/S0928-7655(96)00016-4
Gujarati, D. N. (2009). Basic Econometrics. New York: McGraw Hill.
Gurgul, H., & Lach, L. (2011). The Electricity Consumption versus Economic Growth of The Polish Economy. Energy Economics, 34(2), 500–510. https://doi.org/10.1016/j.eneco. 2011.10.017
Ibrahim, M. H. (2000). Cointegration and Granger Causality Tests of Stock Price and Exchange Rate Interactions in Malaysia. ASEAN Economic Bulletin, 17(1), 36–47.
Ke, L. (2012). Relationship Between Electricity Consumption and Economic Growth of China Based on Threshold Regression Model. Systems Engineering: Theory and Practice, 8, 1704–1711.
Keong, Y. C. (2005). Energy Demand, Economic Growth, and Energy Efficiency- The Bakun dam-induced Sustainable Energy Policy Revisited. Energy Policy, 33(5), 679–689. https://doi.org/10.1016/j.enpol.2003.09.017
Lee, C. C. (2005). Energy Consumption and GDP in Developing Countries: A Cointegrated Panel Analysis. Energy Economics, 27(3), 415–427. https://doi.org/10.1016/j.eneco.2005.03.003
Masih, A. M. M., & Masih, R. (1996). Energy Consumption, Real Income and Temporal Causality: Results from a Multi-country Study Based on Cointegration and Error Correction Modelling Techniques. Energy Economics, 18(3), 165–183. https://doi.org/10.1016/0140-9883(96)00009-6
Narayan, P. K., & Singh, B. (2007). The Electricity Consumption and GDP Nexus for The Fiji Islands. Energy Economics, 29(6), 1141–1150. https://doi.org/10.1016/j.eneco.2006.05.018
Polemis, M. L., & Dagoumas, A. S. (2013). The Electricity Consumption and Economic Growth Nexus: Evidence from Greece. Energy Policy, 62, 798–808. https://doi.org/10.1016/j.enpol. 2013.06.086
Raza, S. A., Jawaid, S. T., & Siddiqui, M. H. (2016). Electricity Consumption and Economic Growth in South Asia. South Asia Economic Journal, 17(2), 200–215. https://doi.org/10.1177/1391561416649721
Sami, J., & Mukun, K. K. (2011). The Relationship Between Exports, Electricity Consumption and Economic Growth: Empirical Evidence from Brazil. World Review of Business Research, 1(5), 28–37.
Shiu, A., & Lam, L. P. (2004). Electricity Consumption and Economic Growth in China. Energy Policy, 32(1), 47–54. https://doi.org/10.1016/S0301-4215(02)00250-1
Solarin, S. A. (2011). Electricity Consumption and Economic Growth: Trivariate Investigation in Botswana with Capital Formation’. International Journal of Energy Economics, 1(2), 32–46.
Solarin, S. A., & Shahbaz, M. (2013). Trivariate Causality Between Economic Growth, Urbanisation and Electricity Consumption in Angola: Cointegration and Causality Analysis. Energy Policy, 60, 876–884. https://doi.org/10.1016/j.enpol.2013.05.058
Tang, C. F. (2008). A Re-examination of The Relationship Between Electricity Consumption and Economic Growth in Malaysia. Energy Policy, 36(8), 3077–3085. https://doi.org/10.1016 /j.enpol.2008.04.026
Wolde-Rufael, Y. (2014). Electricity Consumption and Economic Growth in Transition Countries: A Revisit Using Bootstrap Panel Granger Causality Analysis. Energy Economics, 44, 325–330. https://doi.org/10.1016/j.eneco.2014.04.019
Yang, H. Y. (2000). A Note on The Causal Relationship Between Electricity and GDP in Taiwan. Energy Economics, 22, 309–317.
Yoo, S. H. (2005). Electricity Consumption and Economic Growth: Evidence from Korea. Energy Policy, 33(12), 1627–1632. https://doi.org/10.1016/j.enpol.2004.02.002
DOI: 10.15408/etk.v18i1.7455
Refbacks
- There are currently no refbacks.
Copyright (c) 2019 ETIKONOMI
