Energy-growth nexus: Evidence from a panel of ASEAN regional forum countries

Energy plays an important role in economic growth. As a result, the causal nexus between the two has been the central and topical issue in energy economics. The investigation of this causal nexus is important for two reasons. First, government can properly formulate the energy policy. For instance, if it is found the evidence of causality (unidirectional/ bidirectional) between energy consumption and economic growth, then any policy to increase/ decrease energy consumption would have effect on economic growth. Second, it can provide substantial supports to the debate regarding the causal nexus between energy consumption and economic growth. There are many studies relating the causal nexus between energy consumption and economic growth, both at aggregate and disaggregate level. Advancing on earlier work, this paper uses panel vector autoregressive (VAR) model to 26 ASEAN Regional Forum (ARF) countries for examining the causal nexus between electricity consumption and economic growth. Our novel panel-data estimation method allows for more robust estimates by utilizing variation between countries as well as variation over time. The study finds unidirectional causal flows from electricity consumption to economic growth and discusses their implications in the development policy.