Current Issues in Time-Series Analysis for the Energy-Growth Nexus; Asymmetries and Nonlinearities Case Study: Pakistan

This paper investigates the asymmetric impact of energy consumption on economic growth by including oil prices, capital and labour as additional determinants in production function. In doing so, the non-linear ARDL bounds testing approach is applied for the period of 1985QI-2016QIV. The empirical evidence confirms the presence of symmetric and asymmetric cointegration between energy consumption, oil prices, capital, labour and economic growth over the period of 1985QI-2016QIV. Furthermore, rise in energy consumption (positive shock) adds to economic growth via stimulating economic activity and energy consumption negative shock retards economic growth insignificantly. Rise (positive shock) and fall (negative shock) in oil prices decline and stimulate economic growth. Capital and labor affect economic growth positively and negative by positive and negative shocks in capital and labor. The empirical findings open new insights for policy makers for long-run and sustainable economic development.