Determining the direction of causality between economic growth and electricity consumption is crucial for a thorough policy development. Despite various studies conducted by the researchers, the causality relationship between energy consumption and economic growth in Malaysia is still ambiguous and inconclusive. This paper aims to analyze the direction of causality in Malaysia by using recently available data to increase the robustness of the outcome. A series of data spanning from 1980 to 2021 was used to analyze the Johansen cointegration and Granger causality tests. The results of this study discovered no cointegration of electricity consumption and GDP growth, and only a short-run relationship can be derived. The Granger causality results show a unidirectional relationship with the conservation hypothesis, suggesting that real GDP Granger causes electricity consumption. These findings suggest that implementing energy efficiency and conservation efforts are feasible in Malaysia, as energy consumption does not negatively impact economic growth.

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The Nexus of Electricity Consumption and GDP Growth in Malaysia

  • Muhammad Fareez Jamali

摘要

Determining the direction of causality between economic growth and electricity consumption is crucial for a thorough policy development. Despite various studies conducted by the researchers, the causality relationship between energy consumption and economic growth in Malaysia is still ambiguous and inconclusive. This paper aims to analyze the direction of causality in Malaysia by using recently available data to increase the robustness of the outcome. A series of data spanning from 1980 to 2021 was used to analyze the Johansen cointegration and Granger causality tests. The results of this study discovered no cointegration of electricity consumption and GDP growth, and only a short-run relationship can be derived. The Granger causality results show a unidirectional relationship with the conservation hypothesis, suggesting that real GDP Granger causes electricity consumption. These findings suggest that implementing energy efficiency and conservation efforts are feasible in Malaysia, as energy consumption does not negatively impact economic growth.