The Economic Consequences of Energy Shortages in Pakistan

Abstract

The investigation in the present study looks at the connections between energy use, electricity shortages, population growth, and Pakistan's economic development. It emphasizes the critical role that energy plays in a country's economy and the detrimental effects of a lack of adequate power supply on economic growth and productivity. The research explores the interdependencies and effects of energy use, electricity shortages, and population on Pakistan's gross domestic product (GDP) per capita by using secondary data from 1980 to 2021. According to the data, there is a considerable positive association between energy use and economic growth. The research reveals an opposite association between electricity shortages and GDP. Additionally, there is a strong positive correlation between population growth and GDP per capita. The important relationships between GDP per capita, population growth, electricity shortages, and long-term energy use are supported by statistical analysis, which rejects the null hypothesis. Although serial correlation and heteroskedasticity are detected by residual analysis, the scaled estimated sum of squares shows that these factors have little impact on the model's overall explanatory ability. The present model successfully reflects the connections between the variables, according to the Ramsey RESET test. The results of the Fully Modified Ordinary Least Square and Dynamic Ordinary Least Square tests support the relevance of energy usage, electricity shortages, and population growth on Pakistan's GDP per capita. This detailed analysis offers insightful information on current patterns in economic growth. It emphasizes how crucial it is to take into account interdependencies and long-term effects while developing policies and analyzing economic trends.