Energy Consumption - Growth Nexus : A Case Study of Malaysia

In the present world, the economic development of a country has a significant influence on energy consumption. The scarcity and exhaustible natural resources are depleting at an alarming rate causing more studies to focus on finding the factors affecting the energy consumption in order to conserve the natural resources. The study examines the nexus between economic growth, energy subsidies, international oil price and energy consumption in Malaysia. The study used time series data from 1987 to 2017 and utilizing the energy demand model. All of the models are estimated using the autoregressive distributed lag (ARDL) approach. The results showed the existence of long-run cointegration in between the energy consumption and the explanatory variables. Besides, the long-run coefficients of the independent variables for all the models exhibit the same expected sign where economic growth and energy subsidies are positively correlated. In contrast, the international oil price is negatively correlated. The findings suggested all the factors; economic growth, energy subsidies and international oil price, are significant in influencing the changes of energy consumption in the long-run except for energy subsidies is found to be not significant in the industrial sector model. The study conveys practical policy recommendations for the government that energy conservation would not harm the economic growth in Malaysia