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A multivariate cointegrated modelling approach in testing temporal causality between energy consumption, real income and prices with an application to two Asian LDCs

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dc.contributor.authorMohammed Masih, Abul Mansur
dc.contributor.authorMasih, Rumi
dc.date.accessioned2018-11-05T11:30:52Z
dc.date.available2018-11-05T11:30:52Z
dc.date.issued1998
dc.description.abstractUnlike previous studies on the casual relationship between energy consumption and economic growth, this paper illustrates how the finding of cointegration (i.e. long-term equilibrium relationship) between these variables, may be used in testing Granger causality. Based on the most recent Johansen's multiple cointegration tests preceded by various unit root or nonstationarity tests, we test for cointegration between total energy consumption, real income and price level of two Asian LDCs: Thailand and Sri Lanka. Nonrejection of cointegration between variables rules out Granger noncausality and implies at least one way of Granger-causality either unidirectional or bidirectional. Secondly, by using a dynamic vector error-correction model, we then analyse the direction of Granger-causation and hence the within-sample Granger-exogeneity or endogeneity of each of the variables. Thirdly, the relative strength of the causality is gauged (through the dynamic variance decomposition technique) by decomposing the total impact of an unanticipated shock to each of the variables beyond the sample period, into proportions attributable to shocks in the other variables including its own, in the multivariate system. Finally, these response paths of shocks to the system are traced out using impulse response graphs. Results based on these four tools of methodology, broadly indicate that all three variables are cointegrated and exhibit two common trends within each system. Energy consumption seems to be relatively exogenous as neither income nor prices seems to Granger cause this variable via any of the channels where potential casuality may occur. Though, energy consumption itself plays an important role in influencing income and prices by varying degrees of significance for each country. Overall, shocks to the system seemed to have had a more sustained if not pronounced effect in Thailand than in Sri Lanka.en_US
dc.identifier.citationMohammed Masih, Abul Mansur & Masih, Rumi. (1998). A multivariate cointegrated modelling approach in testing temporal causality between energy consumption, real income and prices with an application to two Asian LDCs. Applied Economics, 30, pp. 1287-1298.en_US
dc.identifier.issn0003-6846
dc.identifier.urihttps://ikr.inceif.org/handle/INCEIF/2991
dc.languageEnglish
dc.language.isoenen_US
dc.publisherRoutledgeen_US
dc.rights1998. Routledge
dc.sourceSEDONA
dc.subjectCointegrationen_US
dc.subjectEnergy consumptionen_US
dc.subjectReal incomeen_US
dc.subjectEconomic growthen_US
dc.subjectGranger causalityen_US
dc.subjectAsian LDCsen_US
dc.subjectThailanden_US
dc.subjectSri Lankaen_US
dc.titleA multivariate cointegrated modelling approach in testing temporal causality between energy consumption, real income and prices with an application to two Asian LDCsen_US
dc.typeJournal Articleen_US
dlc.maintopicConventional finance
dlc.subtopicEconomics
dspace.entity.typePublication
ikr.doctypeScholarly Works
ikr.topic.maintopicConventional financeen_US
ikr.topic.subtopicEconomicsen_US
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