Abstract
Developing countries, including Pakistan, need a considerable effort to withstand economic growth; however, these countries have to cope with greenhouse gases emission and other environmental concerns. Financial advancement gives rise to modern, sometimes even innovative and energy-efficient technologies and, thus, contributes to a decline in energy usage among market entities: organizations and households. The current study explores the nonlinear asymmetric relationship between economic growth (Y) and the selected exogenous variables in Pakistan by incorporating time series data spanning from 1971 to 2016. Economic growth was considered as a target variable, while energy consumption (EC), electric power consumption (EPC), financial development (FD), and energy imports (EM) were considered independent variables. To investigate cointegration among the given variables, a nonlinear ARDL bound testing approach was employed. BDS independence test was used to check the nonlinearity, and a structural break unit root test was used for testing data stationarity. The findings confirm the presence of co-integration in the selected variables. A symmetric unidirectional significant causality exists running from EPC to Y, while a bidirectional symmetric causality was found between FD and Y. In contrast, any negative shocks in EPC, FD, and EM were found to have a positive asymmetric effect on Y. Meanwhile, a neutral effect was found between EC and Y. The outcomes of this study can provide guidelines for future researchers and policymakers.
Highlights
The primary purpose of this study is to examine the significant influences of energy consumption (EC), electric power consumption (EPC), financial development (FD), and energy imports (EM) on economic growth (Y)
The results show that energy imports (EM) are less volatile than energy consumption and electric power consumption (EPC) while financial development (FD) is more volatile than other variables such as energy consumption, electric power consumption, energy imports, and economic growth
To achieve sustainable economic growth, developing nations, like Pakistan, must make considerable efforts to preserve a good environment without the expense of energy and resources
Summary
To meet global societal needs and economic development, the demand for energy resources and other related services has been increased over the last several decades. The increasing trend in energy resources has resulted in dramatic growth in environmental degradation and greenhouse gas (GHG) emissions [1,2,3,4]. Several studies have pointed out that the growth in CO2 emissions has been mainly driven by the combustion of fossil energy (two-thirds of global CO2 emissions) in support of human activities associated with economic growth and development [5,6,7,8]. Society is slowly moving towards more sustainable production methods, minimizing waste, reducing vehicle air pollution, distributed energy generation, protecting native forests and green spaces, and reducing greenhouse gas emissions [9]
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