Does Financial Development, Economic Growth and Industrial Growth Intensify Energy Consumption in Pakistan?

Abstract

Pakistan has observed up to 80% increase in energy consumption during last 2 decades. There has been a dramatic surge in the industrial growth rate since 9/11, when foreign aid flooded the national economy. As a result of the highest power demand in the country’s history, brought on by rapid industrialization and economic growth, 2007 marked the year when Pakistan experienced its largest power shortfall. This paper investigates the relationship of financial development (FD), economic growth (GDP), exports (EXP) and industrial growth (IND) with energy consumption (EC) in Pakistan. ARDL ECM and Bound testing have been used for this investigation for a data spanning from 1980 to 2021 for Pakistan. A short-run and significant relationship of financial development (FD), economic growth (GDP) and industrial growth (IND) with energy consumption (EC) have been found. Only exports have a significant long-run association with energy use.