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Vol. 4 No. 3 (2024)
The International "Journal of Academic Research for Humanities"

Research Articles

Energy Productivity and Economic Growth Nexus: A Case Study of Pakistan from 1990-2018

Published 24-07-2024

  • Dr. Yasir Arafat
    • ,
  • Ms. Azra Amir
    • ,
  • Dr. Fariha Sami

Dr. Yasir Arafat
Lecturer, Department of Economics, University of Chitral, KP, Pakistan

Ms. Azra Amir
Lecturer, Department of Political Science, University of Chitral, Pakistan

Dr. Fariha Sami
Assistant Professor, Department of Economics, Saheed Banazir Bhutto Women University, Peshawar, Pakistan

Abstract

  This study investigates the relationship between energy and economic growth in Pakistan from 1990 to 2018. Using Gross Domestic Product (GDP) as the dependent variable, the study examines the effects of gross fixed capital formation, labor productivity, energy balance, oil prices, and Foreign Direct Investment (FDI) in the energy sector as independent variables. The analytical framework employs the Auto Regressive Distributed Lag (ARDL) Model, while the stability of variables is assessed through CUSUM and CUSUM Square tests. Key findings reveal that labor force participation in the energy sector and rising oil prices have a sustained negative impact on economic growth. Conversely, gross fixed capital formation positively influences GDP both in the short and long term. Interestingly, FDI in the energy sector shows a negative effect on GDP in the short term but a positive effect in the long term. The study emphasizes the need for a comprehensive transformation of Pakistan's energy sector. It recommends a strategic shift from hydrocarbon-based energy to hydropower to stabilize oil prices and achieve significant, sustainable production increases in the long term. These findings provide critical insights into Pakistan's energy-economic relationship, offering valuable guidance for policymakers, scholars, and industry stakeholders.

Keywords

Energy, productivity, Growth, Hydropower, Prices

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