An Empirical Investigation of Globalization and Energy Consumption: Evidence from Bangladesh

Abstract

Globalization is referred to as a medium of the integration of national economies across the world whereby markets of different origins integrate and operate into a single market. Liberalization policies, particularly with respect to international trade, are believed to attribute to the globalization drives between nations. In addition, globalization has empirically been associated with the global energy market development which is a pre-requisite for development of economies across the globe. Therefore, the aim of this study is to empirically analyse the impacts of globalization on Bangladesh’s energy consumption. To the best of knowledge there is no previous study addressing the effects of globalization on energy consumption in the context of Bangladesh. The study encompasses relevant data for a period of 36 years ranging from 1980 to 2015. As part of the methodology, the data set was tested using Johansen Cointegration test, Granger Causality test and vector error correction model approach. The results reveal that there are long run unidirectional causalities running from energy consumption and globalization to economic growth. However, no long run causal association was found to be running from globalization and energy consumption in Bangladesh. This could be because of the existence of price distortions in the energy market in Bangladesh whereby the economies to engaging in the globalization processes could not boost the per capita energy consumption in the country.