Income and Energy Consumption in Asia – A Panel Cointegration Analysis with Common Factors

32 Pages Posted: 29 Aug 2017

See all articles by Roselyne Joyeux

Roselyne Joyeux

Macquarie University - Department of Economics; Financial Research Network (FIRN); Macquarie University, Macquarie Business School

Ronald D. Ripple

Curtin University; Curtin University - Centre for Research in Applied Economics

Raymond Li

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: August 2017

Abstract

The research presented in this paper studies the relationship between energy consumption and income for a panel of Asian economies. The Asian economies represent a dynamic, diverse, and interesting set of countries on which to base an examination of these relationships and the tendencies for these economies to be on a path of convergence and integration in their energy consumption and use characteristics.

We start with an overview of the evolution of energy intensities for the individual countries in our study. Panel data methodologies are then employed to gain the advantage of increased explanatory power of the econometric analysis results from pooling time series and cross-section observations. In addition, our panel cointegration analyses incorporate common factors as a means of accounting for variables beyond the bivariate relationship between income and total final energy consumption.

The results find support for the flow of causality running from income to energy consumption, albeit with feedback. The results are consistent with and supportive of the findings of the seminal paper by Kraft and Kraft (1978). In addition, the long-run income elasticity estimates for the panel find that the estimates are very sensitive to the inclusion or exclusion of common factors.

Keywords: Energy consumption, income, panel cointegration and causality, common factors

JEL Classification: C33, Q43, Q48

Suggested Citation

Joyeux, Roselyne and Ripple, Ronald D. and Li, Raymond, Income and Energy Consumption in Asia – A Panel Cointegration Analysis with Common Factors (August 2017). Macquarie University Faculty of Business & Economics Research Paper No. 3/2017. Available at SSRN: https://ssrn.com/abstract=3028771 or http://dx.doi.org/10.2139/ssrn.3028771

Roselyne Joyeux (Contact Author)

Macquarie University - Department of Economics ( email )

Sydney NSW 2109
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Ronald D. Ripple

Curtin University ( email )

GPO Box U1987
Perth, WA WA
Australia

Curtin University - Centre for Research in Applied Economics ( email )

GPO Box U1987
Perth, Western Australia 6845
Australia

Raymond Li

Hong Kong Polytechnic University - School of Accounting and Finance

Hung Hom
Kowloon
Hong Kong

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