Dynamic Relationship Between Energy and Economic Growth: Evidence from D8 Countries.

Sarwat Razzaqi, Faiz Bilquees, Saadia . Sherbaz

Abstract


Energy sector has a vital influence on an economy, on both
demand and supply sides. Therefore, energy production and consumption
bear great importance for the developing world. The oil embargo of
1970‘s and its impact on major macroeconomic variables throughout the
world attracted many economists to examine the relationship between
energy and economic prosperity. The researchers have been unable to
establish a definitive direction of causality between the two variables.
The purpose of this study is to empirically investigate the dynamic
relationship between energy use and economic growth in the D8 countries.
The evidence gathered through application of VAR Granger Causality,
Johansen Cointegration and VECM proves existence of short-run and
long-run correlation between energy use and economic development in all
countries. The results supported either uni-directional or
bi-directional causality in the D8 countries except for Indonesia in
short-run where non-causality was established between the two variables.
JEL classifications: C22; Q43. Keywords: Energy Use, Economic Growth,
D8, VAR Granger Causality, Cointegration, VECM

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DOI: https://doi.org/10.30541/v50i4IIpp.437-458

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