Finance–Growth–Energy Nexus and the Role of Agriculture and Modern Sectors: Evidence from ARDL Bounds Test Approach to Cointegration in Pakistan. (October 2016)

• Record Type: Journal Article
• Authors: Shahbaz, Muhammad; Islam, Faridul; Butt, Muhammad Sabihuddin
• Is Part Of: Global business review. Volume 17:Number 5(2016)
• Page Start: 1037
• Page End: 1059
• Publication Date: 2016-10
• Subjects: Energy consumption -- economic growth -- financial development -- Pakistan; Economic history -- 1990- -- Periodicals; Industrial management -- Periodicals; Business -- Periodicals; Commerce -- Periodicals; 650.05
• DOI: 10.1177/0972150916656655
• Languages: English
• ISSNs: 0972-1509

Abstract

This article explores the relationship between financial development and energy consumption by incorporating economic growth, agriculture and modern sectors in Pakistan over the period 1972–2011. The autoregressive distributive lag (ARDL) bounds testing approach to cointegration, assuming structural breaks, confirms cointegration. Innovation accounting approach, used to examine the direction of causality, shows that economic growth causes energy demand. We also fine bidirectional causality between financial development and energy consumption, and between modern sector growth and energy consumption. Energy consumption Granger causes agriculture growth. The results offer valuable insights for policymakers in crafting appropriate energy policy for Pakistan.