Economic growth, exports, and role of energy conservation: Evidence from panel co-integration-based causality models in South Asia

Abstract

This study examines the relationship among energy use, real gross domestic product, and exports and thereby the impact of energy conservation for the quest of a sustainable environment-gross domestic product growth in the panel of five South Asian countries. The aggregate production function framework is estimated by employing first/second generational panel co-integration-based models for the panel data covering the years 1980–2014. The empirical findings demonstrate a statistically significant panel error correction mechanism among real gross domestic product, capital, labor, and energy use in both export-added and export-excluded models. The findings of panel causality test depict a significant causal relationship running from export and energy use towards gross domestic product in the long run. Furthermore, a significant feedback relationship between energy use and gross domestic product and between exports and gross domestic product has been found in the short run. These findings of vector error correction model-based panel causality test imply that reducing/cutting the extant aggregate energy use (fossil fuel dominant) via conservation policies are somewhat wanting and could be implemented at the cost of lower gross domestic product and export growths, ceteris paribus. Therefore, for reducing the level of carbon emissions arising from fossil fuel-based energy use and for a sustainable aggregate energy use to the production sector per se, there is an immense need of developing environment friendly/green sources of energy in the region. These consolidated and concerted strides of developing and substituting environment friendly energy options into the extant aggregate energy use will, inter alia, ensure the sustainability of environment-gross domestic product growth in South Asia.