Acta Universitatis Danubius. Œconomica, Vol 9, No 3 (2013)

Abstract

Energy is considered a key ingredient for economic growth of a country. It increases not only the employment but also the living standards of individuals. This paper has objective to find the extensive association between energy consumption and economic growth in Pakistan from the periods of 1978 to 2012 by applying Johansen co integration, error correction model and the granger causality test which present the unidirectional causality between energy consumption and economic growth, it starts from consumption to growth. The results also conclude that less prices and drop off energy shortfalls, favourable policies and reduced uncertainty may lead to economic growth for Pakistan. This study also defines the significance of energy sector and suggests direct investment in this sector by utilizing local energy resources.