Determinants of Energy Consumption in Newly Industrialised Countries of Asia

Abstract

This study focuses on identifying the factors that lead to energy consumption in select newly industrialized countries of Asia such as China, India, Indonesia, Malaysia, Philippines and Thailand. GDP, Exchange rate, industrialization, urbanization and trade openness are the select factors identified and such data is obtained for a period from 1980 to 2018. To check for stationarity, ADF unit root test and PP unit root test is employed where all variables are found to be stationary at first difference. OLS regression is applied to identify which factor has an impact on energy consumption. Besides, Johansen cointegration test to establish long run relationship and VECM is employed, where all variables were found to be integrated in the long run however VECM indicated that for China and Malaysia energy consumption is able to achieve equilibrium after a shock in the previous period. To determine causal links between variables, Toda Yamamoto Causality test is applied. Results indicate that industrialization, exchange rate, financial development and trade openness causes energy consumption in China. However, in India and Thailand only industrialization causes energy consumption. GDP causes energy consumption in Indonesia and trade openness causes energy consumption in Malaysia.

Macroeconomic Determinants of Energy Consumption in BRICS (Brazil, Russia, India, China, South Africa)

“…Using random effects approach, financial development had a non-significant positive impact on energy consumption in model 1 whilst model 2, 3 and 4 produced results which show a significant positive relationship running towards energy consumption from financial development. The results are in line with findings produced by Samuel et al (2013), Fernandes andReddy (2021) and Lefevre and Mainguy (2020).…”

“…A significant positive relationship running from trade openness towards energy consumption was also observed across all the four models, consistent with a study done by Ismail et al (2017) in the case of ASEAN seven member countries. Economic growth was also noted to have had a significant positive effect on energy consumption, in line with a research done by Fernandes and Reddy (2021) in the case of Indonesia.…”

“…Using fixed effects, financial development had a significant positive impact on energy consumption in model 1 and a non-significant positive effect on energy consumption in model 2. These results are supported by a study done by Fernandes and Reddy (2021) in the case of China.…”

“…The results resonate with earlier similar research on the subject matter done by Yessengali and Murat (2018). Using FMOLS approach, financial development had a non-significant but positive influence on energy consumption across all the four models as generally supported by most recent literature (Fernandes and Reddy, 2021). In line with available literature (Mehrara et al 2015), human capital development was also found to have had a significant positive influence on energy consumption in all four models.…”

Is Trade Openness the Reason of High Energy Demand in China?

“…The interlink between energy consumption and macroeconomic indicators namely GDP growth, urbanization, Foreign Direct Investment (FDI), financial development, oil prices, innovation, technological development is widely studied and is an established phenomenon (Akinwale, 2018;Cao and Xu, 2020;Fernandes and Reddy, 2021;Humbatova et al, 2020;Samuel et al, 2013). There is a dearth of studies that have taken trade as the main determinant of the energy demand while conducting an empirical study on a single country as most of the studies has used panel data for the analysis (Fitriyanto and Iskandar, 2019;Kyophilavong et al, 2015;Nasreen and Anwar, 2014).…”