Financial development and energy consumption nexus in Malaysia: A multivariate time series analysis

Islam, Faridul; Shahbaz, Muhammad; Ahmed, Ashraf Uddin; Alam, Md. Mahmudul

doi:10.1016/j.econmod.2012.09.033

Cited by 478 publications

(147 citation statements)

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“…This finding is consistent with the findings of Shahbaz and Lean (2012) for Tunisia, Islam et al (2013) for Malaysia, Shahbaz et al (2014a) for Bangladesh and Mahalik and Mallick (2014a) for India. As far as the positive and significant relationship between economic growth and energy consumption is concerned, our study in terms of policy suggests that the government of India needs to adopt a very cautious energy policy for targeting a reduction in the usage of various energy inputs for the sake of improving environmental quality.…”

Section: Empirical Results and Discussionsupporting

confidence: 82%

“…Shahbaz and Lean (2012) find a long run relationship between energy consumption, economic growth, financial development, industrialization and urbanization for Tunisia. Islam et al (2013) find evidence that financial development positively affects energy consumption in Malaysia. Xu (2012) finds evidence that financial development has a positive impact on energy consumption in China.…”

Section: Related Literature Reviewmentioning

confidence: 95%

“…Ozturk (2010), for example, offered a comprehensive survey of recent contributions in the literature concerning the issue and ultimately observes that no consensus could be reached about the direction of causality between energy consumption and economic growth. More recently studies have extended the relationship between economic growth and energy consumption to include financial development and urbanization (Shahbaz and Lean, 2012;Islam et al 2013;Menegaki and Ozturk, 2013). A number of other studies between economic growth and energy consumption also relate with the issue of carbon dioxide emissions through testing of the Environmental Kuznets Curve (EKC) hypothesis (Apergis and Ozturk, 2015).…”

Section: Related Literature Reviewmentioning

confidence: 99%

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The role of globalization on the recent evolution of energy demand in India: Implications for sustainable development

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Section: Empirical Results and Discussionsupporting

confidence: 82%

Section: Related Literature Reviewmentioning

confidence: 95%

Section: Related Literature Reviewmentioning

confidence: 99%

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The role of globalization on the recent evolution of energy demand in India: Implications for sustainable development

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“…In addition, urbanization and financial development lead industrialization, which Granger causes energy demand. Likewise, Islam et al [31] also observed the bidirectional causal relationships between population and energy consumption. In the case of Ghana, Adom et al [32] investigated the impact of energy prices, income, industrial growth and urbanization on energy consumption.…”

Section: Literature Reviewmentioning

confidence: 92%

The effect of urbanization, affluence and trade openness on energy consumption: A time series analysis in Malaysia

Shahbaz

Loganathan

Sbia³

et al. 2015

Renewable and Sustainable Energy Reviews

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This paper investigates the impact of urbanization on energy consumption by applying the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) in case of Malaysia. The study covers the time period of 1970Q1-2011Q4. The unit root test and the ARDL bounds testing approach have been applied to examine integrating properties and long run relationship in the presence of structural breaks. Our results validated the existence of cointegration and exposed that urbanization is a major contributor in energy consumption. Affluence raises energy demand. Capital stock boosts energy consumption. Trade openness leads affluence and hence increases energy consumption. The causality analysis finds that urbanization Granger causes energy consumption. The feedback effect is found between energy consumption and affluence and, energy consumption and capital. The bidirectional causality exists between trade openness and energy consumption.

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“…Xu (2012) revealed a positive relationship between financial development and energy consumption in China when financial development is measured by the ratio of loans in financial institutions to GDP and by the ratio of foreign direct investment (FDI) to GDP. For Malaysia, Islam et al (2013) found that energy consumption is influenced positively by economic growth and financial development in both the short term and the long term. Coban and Topcu (2013) indicated no significant relationship in the E27 countries.…”

Section: Financial Development and Energy Consumption In Other Countriesmentioning

confidence: 99%

Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis

et al. 2017

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This paper investigates the asymmetric relationship between energy consumption and economic growth by incorporating financial development, capital and labour into a production function covering the Indian economy from 1960Q 1 -2015Q 4 . The nonlinear autoregressive distributed lag bounds testing approach is applied to examine the asymmetric cointegration between the variables. An asymmetric causality test is also employed to examine the causal association between the considered variables. The results indicate cointegration between the variables in the presence of asymmetries. The asymmetric causality results show that only negative shocks in energy consumption have impacts on economic growth. In the same vein, only negative shocks in financial development have impacts on economic growth. By contrast, symmetrically, capital formation causes economic growth. Finally, over the study period, a neutral effect exists between the labour force and economic growth in India. The implications of these results for growth policies in India are also discussed.Keywords: Financial Development, Energy, Growth, India, Asymmetries JEL classification: O13 Acknowledgements: We would like to thank the editor, Professor Richard Tol (University of Sussex, Brighton, UK), as well as the three anonymous reviewers, for their valuable comments and suggestions that helped us improve our paper significantly. We also thank the participants at the 7 th International Research Meeting in Business and Management (IPAG, Nice, France, 11-12 July 2016). We are also grateful to Jawad Kazmi for his technical assistance. The authors' are responsible for any remaining errors or shortcomings. IntroductionThis study uses quarterly data to investigate the relationship between energy consumption and economic growth in India over the 1960-2015 period. Financial development (measured by domestic credit to the private sector), 1 capital formation and labour force 2 are also included in the Cobb-Douglas production function. This study's main contribution to the existing literature on the energy-growth nexus concerns its examination of the potential asymmetric relationship between the variables. Taking this asymmetry into account is important because a positive or negative variation on one variable does not have the same impact on the other variable. The existence of an asymmetric relationship between two variables can be caused by numerous factors, one of which concerns the complexity of economic systems and the mechanisms that generate the variables under study. This complexity may induce various channels through which one variable affects another. In our case, the relationship between energy consumption and economic growth has been found to be very complex because previous studies have shown four possible impact channels: the growth, conservative, feedback and neutrality hypotheses. 3 On the one hand, the relationship between energy consumption and financial development can also be very complex because numerous impact channels can exist between them...

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Financial development and energy consumption nexus in Malaysia: A multivariate time series analysis

Abstract: Despite a bourgeoning literature on the existence of a long-run relationship between energy consumption and economic growth, the findings have failed to establish clearly the direction of causation. A growing economy needs more energy, which is exacerbated by growing population.

Cited by 478 publications

References 41 publications

The role of globalization on the recent evolution of energy demand in India: Implications for sustainable development

The role of globalization on the recent evolution of energy demand in India: Implications for sustainable development

The effect of urbanization, affluence and trade openness on energy consumption: A time series analysis in Malaysia

Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis

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