Energy-Economy Nexus in Indonesia: A Bivariate Cointegration Analysis

Asian Journal of Empirical Research 2(6): 205-218

14 Pages Posted: 20 Jun 2015 Last revised: 8 Aug 2015

See all articles by Ismail Soile

Ismail Soile

University of Lagos; University of Dundee - Centre for Energy, Petroleum and Mineral Law & Policy (CEPMLP)

Date Written: December 20, 2012

Abstract

Inefficient pricing of energy products has become common feature of governments in many oil exporting developing countries. As developing countries, this can be justified only when the increased growth results from such higher energy consumption. To this end, the study examined the direction of causality between energy consumption and economic growth, and the possibility of a long run relationship between the two variables using Indonesia’s time series for the period of 1971-2010. The Granger causality test revealed a unidirectional causation running from economic growth to energy consumption, and the existence of a long run relationship. The study therefore suggests the pursuance of major reforms to ensure appropriate pricing of energy products. This can help checkmate excessive consumption with no devastating harm to economic growth.

Keywords: Energy Consumption, Economic Growth, Granger Causality, VAR and Indonesia

JEL Classification: C22, O40, Q43, Q48

Suggested Citation

Soile, Ismail, Energy-Economy Nexus in Indonesia: A Bivariate Cointegration Analysis (December 20, 2012). Asian Journal of Empirical Research 2(6): 205-218. Available at SSRN: https://ssrn.com/abstract=2620984

Ismail Soile (Contact Author)

University of Lagos ( email )

Akoka
PMB 4491
Akoka, Lagos State 00234
Nigeria
+2348076184184 (Phone)

University of Dundee - Centre for Energy, Petroleum and Mineral Law & Policy (CEPMLP) ( email )

Nethergate
Dundee, Scotland DD1 4HN
United Kingdom

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