Acta Universitatis Danubius. Œconomica, Vol 11, No 2 (2015)

Contribution of Financial development in electricity-growth nexus in Pakistan

Adnan Rashid


The aim of this paper is to scrutinize the causal connection within economic uplift and electricity consumption in Pakistan. Therefore there is a need to incorporate a third variable as a financial development in traditional electricity-growth model by creating a tri-variate causality framework; so the problem of omitted variables bias in this nexus has been eradicated. Empirical results of our study validate a uni-variate an extensive rise in causality in succession from electricity consumption towards financial development and economic development. These results spring strength to argument according to which Pakistan is a state which depend on energy. Every set back in the power supply retards the development process and in consequence the economy moves towards evil of backwardness.  In addition, results show that financial development as well as economic development in Pakistan raises the electricity consumption, and the outcomes are applicable to all regardless of the long run causality observed in Pakistan. Therefore the study commends geared headed for the expansion of power sector through FDI influx and Credit plans in order to handle the rising electricity call utilized by rapid industrialization and growth in the economy. 


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