Abstract
This study is a maiden empirical attempt to examine the long-run linkage between households’ usage of energy and economic progression in Pakistan from the period of 1972–2017. The Autoregressive Distributive Lag (ARDL) bounds testing method to co-integrate is employed to expose the causality dynamics between the variables such as households’ electricity consumption, households’ gas consumption, population growth, and per capita Gross Domestic Product (GDP) in Pakistan. The study adopted three renowned unit root approaches through the use of the Augmented Dickey-Fuller (ADF), the Phillips-Perron (P-P), and Zivot-Andrews (Z&A) tests to check the stationarity of the variables, while the Johansen cointegration technique is also employed to assess the robustness of the long-run association. The validity of outcomes is also checked with casualty and variance decomposition. The estimated results reveal that, in both the short and long run, households’ electricity and gas usage positively affect economic growth, while population growth in the long-run has a negative impact, but the short-run analysis has a positive impact on economic growth in Pakistan. Additionally, the Granger causality and variance decomposition confirm the robustness of outcomes and suggesting a long run association among the variables, and a unidirectional causal link running from three variables to economic growth of Pakistan in the short run.
Highlights
With rapid urbanization and modernization of the economy, in developing countries like Pakistan, the consumption of modern electrical appliances has multiplied
Renewable energy use in electricity production can mitigate CO2 emission significantly [55]. Another investigation conducted by Shahbaz and Feridun [41] examined the association of electricity consumption and economic progression in Pakistan
Energy plays a leading role in a country’s economic progression, and electricity plays a central role as a multi-functional form of energy
Summary
With rapid urbanization and modernization of the economy, in developing countries like Pakistan, the consumption of modern electrical appliances has multiplied. This empirical study offers a five-fold contribution to existing literature in the following ways: (1) we apply several unit root tests such as the augmented Dickey-Fuller (ADF), the Phillip-Perron (PP), and the Zivot and Andrews (Z&A) to check the order of the integration of the study variables, (2) we use annual time series data over the period from 1972–2017, (3) we employ the ARDL bounds testing approach to cointegrate and to inspect the long-run association between the variables, (4) we apply the ARDL-ECM procedure to investigate the short-run and long-run impacts of household energy consumption (electricity and gas), and population growth on economic development, and, (5) in order to check the robustness, we apply the Johansen cointegration technique, the VECM-specified Granger causality test, and the variance decomposition (VDM) method.
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