a b s t r a c t
This paper employs annual data for Malaysia from 1970 to 2008 to examine the causal relationship between economic growth, electricity generation, exports and prices in a multivariate model. We find that there is unidirectional Granger causality running from economic growth to electricity generation. However, neither the export-led nor handmaiden theories of trade are supported and there is no causal relationship between prices and economic growth. The policy implication of this result is that electricity conservation policies, including efficiency improvement measures and demand management policies, which are designed to reduce the wastage of electricity and curtail generation can be implemented without having an adverse effect on Malaysia’s economic growth.Conclusion, limitations and directions for future research
This paper has employed annual data for Malaysia from 1970 to 2008 to examine the causal relationship between economic growth, electricity generation, exports and prices in a multivariate model. The first major finding of the study is that there is unidi- rectional Granger causality running from economic growth to electricity generation. The second major result is that neither the export-led nor handmaiden theories of trade are supported. The third main finding is that there is no causal relationship between prices and economic growth. The policy implication of this result is that electricity conservation policies, including efficiency improvement measures and demand management policies, which are designed to reduce the wastage of electricity and curtail generation can be implemented without having an adverse effect on Malaysia’s economic growth.
In terms of future research, there has been some interest in Malaysia in exploring the potential for combining non-renewable and renewable sources of energy (see [53] for full details). A limi- tation of this study is that we do not differentiate between renewable and non-renewable energy consumption. This is one
direction for future research following the approach in, for example, Payne [40] who examines this issue for the United States.
Different industries have different intensities of energy, and over time the importance of a specific industry will change. Another limitation of this study is that the analysis is at an aggre- gated level. Future studies could follow the approach in studies such as [35,38] and examine the relationship between energy use and GDP at a disaggregated level in Malaysia. A third avenue for future research could be to conduct similar studies for Malaysia’s Asian neighbours, such as China and India, either on their own or as part of a panel study. Such studies could have important policy implications, particularly if carbon dioxide emissions were added as another variable in the VAR framework.