Energy Consumption and Economic Growth in Nigeria: An Augmented Neoclassical Growth Model Perspective
Abstract
This study applied the augmented Neoclassical growth model to the analysis of the relationship between consumption of energy and economic growth in the Nigerian economy. Five definitions of energy consumption were adopted viz: crude oil, gas, coal, electricity and total energy consumption. Apart from economic growth the study also used labour participation and capital accumulation within the framework of the Vector Auto-regression (VAR) and other estimation techniques. The results of the study show that for each of the energy components and growth variables, own shocks were more profound and there were evidences of substitutability of shocks implying that as own shocks reduce, the shocks from other variables increase in magnitude while in other cases, shocks were sinusoidal in nature. The study recommends that comprehensive energy consumption, labour and capital accumulation, and growth-enhancing policies should be designed for the Nigerian economy and in the context of such policies all the variables adopted in the VAR models are to be treated as target and instruments of energy consumption, capital accumulation, labour participation and economic growth.
References
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[31] Pokrovski, V.N. 2003. Energy in the Theory of Production. Energy, 28: 769–88.
[32] Rahman, M.M. and Velayuthan, E. 2020. Renewable and Non-Renewable Energy Consumption-Economic Growth Nexus: New Evidence from South Asia. Renewable Energy, 147(1): 399-408. DOI:https://doi.org/10.1016/j.renene.2019.09.007
[33] Sarkodie, S.A., Crentsil, A.O. and Owusu 2019. Does Energy Consumption Follow Asymmetric Behavior? An Assessment of Ghana's Energy Sector Dynamics. Science of the Total Environment, 651: 2886-2898. DOI:https://doi.org/10.1016/j.scitoteenv.2018.10.147
[34] Solow, R. 1956. A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 7(1): 65-94.
[35] Sorytas, U. and Sari, R. 2003. Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets. Energy Economics, 25(1): 33-37.
[36] Stern, D. I. 1997. Limits to Substitution and Irreversibility in Production and Consumption: a Neoclassical Interpretation of Ecological Economics. Ecological Economics, 21: 197-215.
[37] Swan, T. 1956. Economic Growth and Capital Accumulation, Economic Records, 32(2): 334-361.
[38] Takayama, A. 1993. Analytical Methods in Economics (University of Michigan Press, Ann Arbor).
[39] Thompson, H. 2006. The Applied Theory of Energy Substitution in Production. Energy Economics, 410-425.
[40] Thompson, H. 2011. Energy in a Physical Production Function: The US Economy from 1951 to 2008, Economics Department Working Paper Series, Auburn University.
[41] Tuna, G. and Tuna, V.E. 2019.The Asymmetric Causal Relationship between Renewable and Non-Renewable Energy Consumption and Economic Growth in the ASEAN-5 Countries. Reso.Pol., 62: 114-24.
[42] Urga, G. and Walters, C. 2003. Dynamic Translog and Linear Logit Models: A Factor Demand Analysis of Inter-fuel Substitution in US Industrial Energy Demand, Energy Economics, 25: 1-21.
[43] Uri, N.D. 1996. Crude Oil Price Volatility and Unemployment in the United States. Energy, 21(l): 29–38.
[44] Waheed, R., Sarwar, S. and Wei, C. 2019.The Survey of Economic Growth, Energy Consumption and Carbon Emission. Energy Reports, 5: 1103-1115.
[45] Walton, A. 1981. Variations in the Substitutability of Energy and Non-energy Inputs: The Case of the Middle Atlantic Region. Journal of Regional Science, 21: 411-420.
[46] Yang, H. Y. 2000. A Note on the Causal Relationship between Energy and GDP in Taiwan. Energy Economics, 22(3): 309-317.
[47] Yi, F. 2000. Dynamic Energy-demand Models: A Comparison, Energy Economics, 22: 285-297.
[2] Allen, R.G.D. 1938. Mathematical Analysis for Economists (St. Martin’s Press, New York).
[3] Aydin, M. 2019. Renewable and Non-Renewable Electricity Consumption-Economic Growth Nexus: Evidence from OECD Countries, Renewable Energy, 136: 599-606.
[4] Barnett, A. H., Reutter, K. and Thompson, H. 1998. Electricity Substitution: Some local Industrial Evidence. Energy Economics, 20 : 411-419.
[5] Bekun, F.V., Emir, F. and Sarkodie, S.A. 2019.Another Look at the Relationship between Energy Consumption, Carbon Dioxide Emission, and Economic Growth in South Africa. Science of the Total Environment, 655: 759-765.
[6] Bemdt, E., and Christensen, L. 1973. The Internal Structure of Functional Relationships: Separability, Substitution and Aggregation. The Review of Economic Studies, 55: 403-410.
[7] Benkraiem, R., Lahiani, A., Miloudi, A. and Shahbaz, A. 2019. The Asymmetric Role of Shadow Economy in the Energy-Growth Nexus in Bolivia. Energy Policy, 125: 405-417.
[8] Burney, N, and Al-Matrouk, F. 1996. Energy Conservation in Electricity Generation: A case Study of the Electricity and Water Industry in Kuwait. Energy Economics, 18: 69-79.
[9] Caloghiro, Y., Mourelatos A. and Thompson, H.1997. Industrial Energy Substitution during the 1980s in the Greek Economy. Energy Economics, 19: 476-491.
[10] Carfora, A., Pansini, R.V. and Scandurra, G. 2019.The Causal Relationship between Energy Consumption, Energy Prices and Economic Growth in Asian Developing Countries: A Replication. Energy Strategy Reviews, 23: 81-85.
[11] Chang, T., Fang, W. and Wen, L.F. 2001. Energy Consumption, Employment, Output and Temporal Causality: Evidence from Taiwan based on Cointegration and Error Correction Modelling Techniques. Applied Economics, 33: 1045-1056.
[12] Denny, M., Fuss, M. and Waverman L.1981.Substitution Possibilities for Energy: Evidence from US and Canadian Manufacturing Industries, in E.R. Berndt and B.C. Field (eds). Modeling and Measuring Natural Resource Substitution (MIT Press, Cambridge).
[13] Ferguson, C.E. and Pfouts, R. 1962. Aggregate Production Functions and Relative Factor Shares, International Economic Review, 3: 328-337.
[14] Field, B. and Grebensteinz, C. 1980. Capital Energy Substitution in US Manufacturing. Review of Economics and Statistics, 62: 207-212.
[15] Ghali, K. H. and El-Sakka, M. I. T. 2004. Energy use and Output Growth Canada. A Multivariate Cointegration Analysis. Energy Economics, 26: 225-238.
[16] Griffin, J. and P. Gregory 1976. An Inter-Country Translog Model of Energy Substitution Responses. American Economic Review, 66: 845-857.
[17] Jebaraj, S. and Iniyan, S. 2006. A Review of Energy Models. Renewable and Sustainable Energy Review, 10: 281-311.
[18] Johansen, S. 1988. Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12: 231-254.
[19] Kaouli, B. 2019. Does Static and Dynamic Relationship between Economic Growth and Energy Consumption Exist in OECD Countries? Energy Reports, 5:104-116
[20] Kraft, J. and Kraft, A. 1978. On the Relationship between Energy and GNP. Journal of Energy Development, 3(2): 326-331.
[21] Kuper, G. and van Soest, D. P. 2003, Path-Dependency and Input Substitution: Implications for Energy Policy Modeling. Energy Economics, 25: 397-407.
[22] Lee, C. and Chang, C. 2007.The Impact of Energy Consumption on Economic Growth: Evidence from Linear and nonlinear models of Taiwan. Energy, 32: 2282-2294.
[23] Lee, C. and Chang, C. 2008. Energy Consumption and Economic Growth in Asian Economies: A More Comprehensive Analysis Using Panel Data. Resource and Energy Economics, 30: 50-65.
[24] Mahmud, S. 2000. The Energy Demand in the Manufacturing Sector of Pakistan: Some Further Results. Energy Economics, 22: 641-648.
[25] Maji, I.K. and Sulaiman, C. 2019.Renewable Energy Consumption and Economic Growth Nexus: A Fresh Evidence from West Africa. Energy Reports, 5: 384-392.
[26] Mankiw, G., Romer, D. and Weil, D. 1992. A Contribution to the Empirics of Growth. Quarterly Journal of Economics, 107: 407-437.
[27] Mann, J. and Sephton, P. 2018. Replication of ‘The Relationship between Energy Consumption, Energy Prices, and Economic Growth: Time Series Evidence from Asian Developing Countries’, Negative Energy Economics. DOI:https://doi.org/10.1016/j.eneco.2018.05.005
[28] Mensah, I.A., et al. 2019. Analysis on the Nexus of Economic Growth, Fossil Fuel Energy Consumption, CO2 Emissions and Oil Price in Africa Based on a PMG Panel ARDL Approach. Journal of Cleaner Production, 228:. DOI:https://doi.org/10.1016/j.jclepro.2019.04.281
[29] Nonneman, W. and Vanhoudt, P.1996. A further augmentation of the Solow Model and the Empirics of Economic Growth for OECD Countries. Quarterly Journal of Economics, 111: 943-953.
[30] Ozcan, B. and Ozturk, I. 2019. Renewable Energy Consumption-Economic Growth Nexus in Emerging Countries: A Bootstrapping Panel Causality Test. Renewable and Sustainable Energy Reviews, 104: 30-37.
[31] Pokrovski, V.N. 2003. Energy in the Theory of Production. Energy, 28: 769–88.
[32] Rahman, M.M. and Velayuthan, E. 2020. Renewable and Non-Renewable Energy Consumption-Economic Growth Nexus: New Evidence from South Asia. Renewable Energy, 147(1): 399-408. DOI:https://doi.org/10.1016/j.renene.2019.09.007
[33] Sarkodie, S.A., Crentsil, A.O. and Owusu 2019. Does Energy Consumption Follow Asymmetric Behavior? An Assessment of Ghana's Energy Sector Dynamics. Science of the Total Environment, 651: 2886-2898. DOI:https://doi.org/10.1016/j.scitoteenv.2018.10.147
[34] Solow, R. 1956. A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 7(1): 65-94.
[35] Sorytas, U. and Sari, R. 2003. Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets. Energy Economics, 25(1): 33-37.
[36] Stern, D. I. 1997. Limits to Substitution and Irreversibility in Production and Consumption: a Neoclassical Interpretation of Ecological Economics. Ecological Economics, 21: 197-215.
[37] Swan, T. 1956. Economic Growth and Capital Accumulation, Economic Records, 32(2): 334-361.
[38] Takayama, A. 1993. Analytical Methods in Economics (University of Michigan Press, Ann Arbor).
[39] Thompson, H. 2006. The Applied Theory of Energy Substitution in Production. Energy Economics, 410-425.
[40] Thompson, H. 2011. Energy in a Physical Production Function: The US Economy from 1951 to 2008, Economics Department Working Paper Series, Auburn University.
[41] Tuna, G. and Tuna, V.E. 2019.The Asymmetric Causal Relationship between Renewable and Non-Renewable Energy Consumption and Economic Growth in the ASEAN-5 Countries. Reso.Pol., 62: 114-24.
[42] Urga, G. and Walters, C. 2003. Dynamic Translog and Linear Logit Models: A Factor Demand Analysis of Inter-fuel Substitution in US Industrial Energy Demand, Energy Economics, 25: 1-21.
[43] Uri, N.D. 1996. Crude Oil Price Volatility and Unemployment in the United States. Energy, 21(l): 29–38.
[44] Waheed, R., Sarwar, S. and Wei, C. 2019.The Survey of Economic Growth, Energy Consumption and Carbon Emission. Energy Reports, 5: 1103-1115.
[45] Walton, A. 1981. Variations in the Substitutability of Energy and Non-energy Inputs: The Case of the Middle Atlantic Region. Journal of Regional Science, 21: 411-420.
[46] Yang, H. Y. 2000. A Note on the Causal Relationship between Energy and GDP in Taiwan. Energy Economics, 22(3): 309-317.
[47] Yi, F. 2000. Dynamic Energy-demand Models: A Comparison, Energy Economics, 22: 285-297.
Published
2020-01-27
How to Cite
ISHIORO, Bernhard O..
Energy Consumption and Economic Growth in Nigeria: An Augmented Neoclassical Growth Model Perspective.
Journal of Environmental Management and Tourism, [S.l.], v. 10, n. 7, p. 1637-1657, jan. 2020.
ISSN 2068-7729.
Available at: <https://journals.aserspublishing.eu/jemt/article/view/4290>. Date accessed: 25 apr. 2024.
doi: https://doi.org/10.14505//jemt.10.7(39).21.
Section
Article
Copyright© 2023 The Author(s). Published by ASERS Publishing 2023. This is an open access article distributed under the terms of CC-BY 4.0 license.