Impact Of Economic Growth And Energy Consumption In Asian Countries Using Panel Data

Abstract

Energy consumption and Economic growth nexus performs a key for economic development because it plays a vital role in economic and social development. Hence, many studies have tried to identify the direction of causality among energy consumption, economic growth, and CO₂ emissions. In order to investigate the relationship among energy consumption, economic growth and CO₂ emissions, the country level data for selected four south Asian countries viz India, China, Bangladesh, and Pakistan for the period 1980-2011 formed a panel data for the study. The empirical results of the Granger Causality indicate that the causality is running from the economic growth and energy consumption to CO₂ emissions. To economise the space, the empirical results of tests of stationarity, cointegraion and casuality are not reported in the study. Based on the identified direction of causality, the impact of economic growth and energy consumption on CO₂ emission level, the pooled OLS, fixed and random effect models are used. The estimates of fixed and random effect models indicate that the energy consumption has a significant positive impact and per capita GDP has negative impact on CO₂ emission per capita. The empirical results have revealed that the CO₂ emission is found to be more elastic in response to energy consumption per capita and the reduction of CO₂ emission in relation to income per capita is less elastic. The contribution of energy consumption to CO₂ emission and the growth of income significantly reduces CO₂ emission in the panel of developing countries indicates that there is a change in the attitudes of people to reduce the pollution level over the years. It is also observed that the China is relatively a predominant contributor in CO2 emission level among the nations accounted for the empirical examination of the study. Hausman’s test indicates that the fixed effect model is more appropriate over the random effect model.