TITLE:
Relationship between Energy Consumption and Economic Growth of Mongolia during the 1981-2016 Years (Cointegration and Causality Analysis)
AUTHORS:
Ganzorig Shagdarsuren, Sodnomdorj Dari, Gantumur Shagdarsuren
KEYWORDS:
Electricity Consumption, Energy Consumption, Granger Causality, Mongolia, Economic Growth, Johansen Test for Cointegration, Vector Error Correction Model
JOURNAL NAME:
Open Access Library Journal,
Vol.11 No.12,
December
31,
2024
ABSTRACT: In the contemporary world, energy is a very important factor for economic development, especially when a country is in the process of accelerating its economy into an industrialized one, as in the developing countries like Mongolia. The nexus between energy consumption and economic growth has been widely studied by various researchers from different countries. This study investigated the causal relationships (i.e., the short- and long-term structural associations) between the gross domestic product (GDP) and different energy variables of Mongolia by applying a modeling strategy based on the Granger causality from the vector error correction model, the augmented Dickey-Fuller and Phillips-Perron unit root tests, and the Johansen cointegration test. The model determined a long-term unidirectional causality from electricity consumption to GDP and from GDP to primary energy. Furthermore, short-term unidirectional causalities were discovered from GDP to electricity consumption and from primary energy consumption to GDP. In the case of causality relationship between electricity consumptions and GDP of Mongolia supports “growth hypothesis” in long term. Accordingly, in case of causality relationship between Primary energy consumption and GDP of Mongolia supports “neutrality hypothesis” in long term. Consequently, we may conclude that Mongolia has electricity driving economic growth and more electrical energy is required to encourage sustainable economic development. This also implies that the increase of electricity consumption affects positively the economic growth.