A Vector Error Correction Model Approach to Investigate the Causal Relationship among Energy Consumption, Real GDP, and Industry Value Added of Bangladesh

This study empirically verifies the existence of significant relationship between inflation and trade openness for Pakistan using annual time-series data for the period of 1976 to 2010. The basic objective of this study is to examine the Romer‘s hypothesis for Pakistan with real agriculture value added, real exchange rate, real gross domestic product, financial market openness, money and quasi money and used trade openness, import openness and export openness ratios separately as explanatory variables with inflation rate as dependent variables. For this purpose, we have used multivariate Johansen (1998) and Johansen and Juselius (1990) Maximum Likelihood Cointegration Approach and a Vector Error Correction Model (VECM) and the expected empirical findings shows that there is a significant positive long-run relationship between inflation and trade openness, which rejects the existence of Romer‘s hypothesis for Pakistan. JEL classification: B26, E31, P24, P44 Keywords: Trade Openness, Inflation, Unit Root Testing, Multivariate Cointegration Approach, Vector Error Correction Model, Pakistan

Download Full-text

Financial Development and Energy Consumption in Sub-Saharan Africa: Evidence From Panel Vector Error Correction Model

SAGE Open ◽

10.1177/2158244020935432 ◽

2020 ◽

Vol 10 (3) ◽

pp. 215824402093543

Author(s):

Chigozie Nelson Nkalu ◽

Samuel Chinwero Ugwu ◽

Fredrick O. Asogwa ◽

Mwuese Patricia Kuma ◽

Queen O. Onyeke

Keyword(s):

Energy Consumption ◽

Error Correction ◽

Granger Causality ◽

Financial Development ◽

Sub Saharan Africa ◽

Vector Error Correction Model ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Sub Saharan

This study examines the nexus between financial development and energy consumption/use in Sub-Saharan Africa (SSA) using a panel vector error correction model (VECM), cointegration, and Granger causality tests over the period ranging from 1975 to 2017. The annual panel time-series data generated from the World Bank database were tested for unit-roots processing using both the Levin–Lin–Chu and Im–Pesaran–Shin before proceeding to Johanson cointegration technique, the results of which motivated the choice of adopting the panel VECM rather than panel vector autoregression in the methodology. From the estimation result especially on the variables of interest, there exists a positive and statistically significant relationship between financial development and energy consumption in the long run, but not statistically significant in the short run. Further findings from the panel Granger causality test shows a unidirectional causality running from financial development to energy consumption, gross domestic product per capita, population growth to urbanization with no feedback. Among a series of policy recommendations, the monetary authorities in Sub-Saharan African countries should ensure optimal utilization of financial instruments and technologies available in the system to enhance more robust financial development to boost efficiency in energy consumption in the region in line with the sustainable growth theory.

Download Full-text