Abstract
The study investigates the short and long run relationship between energy consumption (DEN), manufacturing output (MG) and economic growth (EG), in Pakistan by applying ARDL bound testing approach. The time series employed is covering the period from 1981 to 2014. With Error Correction Model, our findings exhibit that both energy consumption and manufacturing output has established a positive long run relationship with economic growth. Moreover, by using the granger causality, the results provide the unidirectional causal relationship between manufacturing output and economic growth whereas, a bidirectional causality has been found between energy consumption and manufacturing output. The study implicates that Pakistan needs to enhance the capacity of the energy sector for the efficacy of the manufacturing productivity leading to economic growth. Since, Pakistan is facing an energy shortfall it is necessary for the policy makers to take restructuring of energy sector into account, including capacity enhancement while considering environment and eco-friendly renewable energy sources. Keywords: Manufacturing output, energy consumption, economic growth, ARDL bound testing, Granger causality. DOI : 10.7176/JESD/10-6-03 Publication date :March 31 st 2019
Highlights
In last two decades, economic growth in uncertain conditions, has been a grave concern for the policy makers of Pakistan
While considering the importance of manufacturing sector, prevailing energy crises and falling economic growth of Pakistan, we examine the effects of energy consumption and manufacturing growth on economic growth from 1981-2014
It exhibits that level of energy consumption determines the performance of the manufacturing sector which in turn affects the economic growth level
Summary
Economic growth in uncertain conditions, has been a grave concern for the policy makers of Pakistan. The structural growth accounting for 31, 20 and 50 percent of agriculture, manufacturing and service sectors respectively in 1980’s, the contribution to GDP of country’s manufacturing and service sector is improved to 25% and 53% till 2010 respectively whereas, agricultural sector has been dropped to merely 21 percent as mentioned in PES, 2017. It exhibits that a labor abundant country with population of 199 million(estimated) has significantly changed its policies towards sectoral growth within the country. The efficacy of the industry related productivity, has been reduced in recent decades adding comparatively less amount to the economy of the country
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