The Dynamic Relationship between FDI, Economic Growth, Exports and Energy Consumption in Pakistan

Abstract

This research article examines the nexus between foreign direct investment (FDI) and energy consumption by incorporating economic growth and exports of goods and services as potential determinants of energy consumption for Pakistan. The ARDL model has been used to estimate the long-run equilibrium relation. The results indicate a positive nexus between FDI-economic growth-exports-energy consumption. The Granger causality results indicate long-run bidirectional causality between energy consumption, economic growth and exports. While unidirectional causality has been observed in short-run running from FDI, economic growth and exports to energy consumption. These results specify the dominance of the scale effect in short-run over composition and technique effect in Pakistan. It implies that policies to curtail energy consumption must be implemented carefully.