Energy Crisis and Economic Growth: Empirical Investigation from Pakistan

Abstract

In globalizing world, energy plays the role as a basic need for life sustenance and sustainable progress of developed as well as of developing economies. This study has adopted multivariate model using real GDP per capita as indicator of economic growth and the gap between energy demand and supply as measure of energy crisis with employed labor force, real gross capital formation and inflation rate for empirical analysis using annual time series data from 1971-2015 of Pakistan. In order to avoid spurious results, the TYDL approach is employed for causality inspection and the ARDL approach to examine cointegration and estimate results.  Bounds cointegration test confirms the existence of long run relation in model and estimated results of ARDL method ensure the significant impact of energy crisis on real GDP per capita. Causality findings suggest the unidirectional causal flow from energy crisis towards real GDP per capita in the study model.

Keywords: Economic Growth, Energy Crisis, ARDL Cointegration approach, Pakistan

JEL Classification: C10, E10, Q43, Y10