Relationship between Energy Consumption and Economic Growth: Empirical Evidence for Malaysia

Business Systems Review, Vol. 2, No. 1, pp. 17-28, 2013

12 Pages Posted: 27 Dec 2012 Last revised: 2 Nov 2014

See all articles by Mohd Shaari

Mohd Shaari

University of Malaysia Perlis

Nor Hussain

University of Utara Malaysia

Mohammad Ismail

University of Malaysia Perlis

Date Written: December 24, 2012

Abstract

This paper aims to examine the relationship between energy consumptions and economic growth and to address policy problems on energy consumption in Malaysia by using data from 1980 to 2010. Johansen co-integration is employed to analyze the data. Findings show that energy consumptions are related to economic growth. The Granger causality model is used to measure the causal effect of energy consumption and gross domestic product. The results indicate that oil and coal consumption does not Granger cause economic growth and vice versa. Causality runs from economic growth to electricity consumption. A unidirectional relationship exists between gas and economic growth, with causality running from electricity use to economic growth. Therefore, a policy to reduce gas utilization will harm economic growth in Malaysia.

Keywords: economic growth, energy consumption, Johansen co-integration, Granger causality

JEL Classification: O1

Suggested Citation

Shaari, Mohd and Hussain, Nor and Ismail, Mohammad, Relationship between Energy Consumption and Economic Growth: Empirical Evidence for Malaysia (December 24, 2012). Business Systems Review, Vol. 2, No. 1, pp. 17-28, 2013, Available at SSRN: https://ssrn.com/abstract=2194137

Mohd Shaari (Contact Author)

University of Malaysia Perlis ( email )

Perlis, 02600
Malaysia

Nor Hussain

University of Utara Malaysia ( email )

Sintok
COLGIS, UUM
Sintok, KY KEDAH DARUL 06010
Malaysia

Mohammad Ismail

University of Malaysia Perlis ( email )

Perlis, 02600
Malaysia

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