Dynamic modelling of energy and growth in South Asia

Abstract

This study empirically examines the link between real GDP, energy consumption, capital, and labour for four South Asian countries including Bangladesh, India, Pakistan, and Sri Lanka over the period 1972-2004. Applying the bound testing approach to cointegration, we find a strong cointegration between real GDP, energy consumption, capital, and labour for each country. The study mainly focuses on the role played by energy in enhancing productivity in the South Asian region. Based on unrestricted error-correction modelling procedure, we find supportive evidence of long-run as well as short-run causality running from energy consumption to real GDP for each country. These findings suggests that the economies of South Asia are energy-dependent economies. Hence, policies of energy conservation may be formulated in such a way that these policies would not produces adverse effects on economic growth in the region. © The Pakistan Development Review.