Effect of Energy Utilization on Pakistan’s Economic Development: A Time Series Analysis

Abstract

The present research has been conducted to study the causal relation among GDP, electricity utilization, exports, real capital and labor force for Pakistan. Time dependent data for the mentioned parameters have been used for the time period of 1980 to 2022. Inter-relations among the above-mentioned variables have been studied in this work by the method of cointegration using bounds test. The results illustrate that there is an existence of long run relation among the parameters where GDP has been taken into consideration as the dependent variable. Granger causation analysis has also been performed for the variables. Results show that Granger causality between GDP and electricity utilization runs in both directions. Moreover, the study discloses that Electricity utilization granger cause exports and per capita real capital. Exports granger cause per capita real capital. Per capita real capital granger cause GDP. Labor force granger cause GDP and exports. The long run relation equation of GDP, Electricity utilization, exports, real capital and labor force has also been examined for parameter stability. The parameters are found to be stable with the significance level of 5%. The research also suggests some significant strategy recommendations.