An Empirical Analysis to Link Energy Consumption, Renewable Energies and Oil Prices with Economic Growth of Pakistan

Abstract

The purpose of this study is to estimate the relationships between crude oil price, energy consumption, renewable energy generation and economic growth in Pakistan from 1990-2020 through secondary data collected annually on these specific macroeconomic indicators. The impact of all sources of energy on economic growth is not the same. With the world becoming more globalized, energy demand is rising quickly. The majority of nations are experiencing an energy shortage, which has a negative impact on economic growth. The majority of the commercial energy infrastructure in Pakistan is still underdeveloped due to a lack of investment in the energy sector. To organize the data, this study employed the E-views correlation model, regression model and descriptive analysis. The empirical estimate was calculated using the unit root, the Augmented Dickey-Fuller Test, and the Autoregressive distributed lag model after the series was made compatible for co-integration. The empirical models were also utilized to identify heteroscedasticity and autocorrelation. The results shows that in developing countries like Pakistan, economic progress is counterproductive since it leads to a rise in energy demand and consumption, which has both long- and short-term negative effects. On other hand the long-term and short-term effects of rising oil prices and increased electricity production from renewable energy sources in Pakistan have quite positive effect on economic development.