Analysis of GDP and Capital on Energy Usage

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Analysis of GDP and Capital on Energy Usage

Hamidah Ramlan^1*

1 College of Business and Accounting, Universiti Tenaga Nasional, Muadzam Shah, Malaysia

*Corresponding Author: [email protected] Accepted: 15 November 2022 | Published: 1 December 2022

DOI:https://doi.org/10.55057/ijaref.2022.4.4.1

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Abstract: The paper seeks to analyse of GDP and capital on energy usage in Malaysia, China and Pakistan. The data was collected and retrieved from the World Development indicator and Malaysia Energy Information Hub and World Bank from the year 2000 until 2020, been analysed and has employed multiple regression model. The findings show that capital and GDP has positive significant impact on energy consumption in Malaysia. China's energy usage has been positively significantly impacted by economic expansion and capital. In the meantime, Pakistan's energy consumption is positively impacted by economic expansion and capital.

Keywords: economic growth, capital, energy

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1. Introduction

Energy consumption is essential to economic and social growth and to improving life in all countries (Bilgen, 2014). Energy consumption is a primary lever for rapid growth of development. Energy consumption is the amount of energy that being produced and used by the entire human civilization. Bilgili, (2017) suggested that GDP affected with energy consumption. According to Nazar (2021), Malaysia's economic development and consumption of renewable energy are related. Elfaki (2021) examined the effects of energy usage and capital stock on economic growth at Indonesia between 1984 and 2018. This study aims to investigate how economic development and wealth affect energy use in Malaysia, China, and Pakistan.

2. Literature Review

According to Qi et al. (2022), energy consumption has a favourable effect on GDP in West Africa, there is a strong link between the two. Oh (2004) proposed empirical findings indicating a correlation between energy and GDP for Korea from 1970 to 1999. According to Mahalingam (2018), the United States' energy usage is significantly impacted by GDP. The effects of renewable energy on GDP for 116 economies in 2003 were then examined by Chien (2018).

The study provided evidence of the beneficial link between GDP and renewable energy via rising capital creation.

Energy use and GDP are strongly connected, according to Stern (2018), even though energy intensity has decreased over time and is often lower in wealthy nations. A 1% increase in labour, capital, and renewable energy increased GDP by 0.598%, 0.446%, and 0.093%, respectively, according to the Jayed (2020). In a panel of G7 nations, Narayan (2008) looked

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at the connection between capital formation, energy consumption, and real GDP. According to the study, real GDP, capital formation, and energy consumption are all positively correlated.

According to research by Ohler (2014), aggregate renewable energy and hydroelectricity both improve GDP in the near run, however increases in biomass and waste generation have the opposite effect. According to the findings, renewable energy, particularly in nations without oil deposits, improves real output whereas capital stock is the main driver of GDP (Wong, 2013). In the G-7 nations, Salamaliki (2013) discovered a dynamic link between real GDP, capital stock, and energy consumption.

3. Methodology

The yearly energy consumption, capital stock and GDP data were gathered from World Development indicator, Malaysia Energy Information Hub and World Bank from the year 2000 until 2020 Regression analysis were tested using SPSS. Regression test employed to test the significant impact of the variables.

Table 1: Description of Variables

Independent Variables Dependent Variable GDP

Capital stock Energy consumption

4. Findings

4.1 Model Summary Malaysia

Table 2: Model Summary

r r-square

Adj. r-square Std. Err. of Est.

0.759^a 0.576 0.529 0.4119

Note: a. Predictors: (Constant), capital, GDP towards energy consumption.

Based on the table 2 shows the impact between GDP and capital with energy consumption. R- square is determined whether dependent variable and independent variable have been a strong or not connection. Based on the result above, R-Square is 0.576, it means the Capital and GDP can explain 57.6% of the variation in energy consumption at Malaysia.

China

r r-square Adj. r-

square

Std. Err. of Est.

0.902^a 0.814 0.793 0.1141

Note: a. Predictors: (Constant), capital and GDP towards energy consumption.

Based on the table 3 shows the impact between all independent variables and dependent variable. Based on the result above, r-Square is 0.814, it means the Capital and GDP can explain 81.4% of the variation in dependent variable (energy consumption) in China.

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Pakistan

r r- square Adj. r-

square

Std. Err. of Est.

0.988^a 0.976 0.973 0.1017

Note: a. Predictors: (Constant), capital and GDP towards energy consumption.

Based on the table 4 shows the impact between all independent variables and dependent variable. The R-Square is determined whether dependent variable and independent variable have been a strong or not connection. Based on the result above, r-Square is 0.976, it means Capital and GDP can explain 97.6% of the variation in energy consumption at Pakistan.

4.2 ANOVA

Table 5 show the value of F-statistic is 12.246 and p-value at 0.000 is < 0.05, then showed the independent variables are strongly impact to the energy consumption at Malaysia.

Malaysia

Table 5: ANOVA

Sum of sq. df Mean sq. f Sign.

Regression 0.042 2 0.021 12.246 0.000^b

Note: a. Dependent Variable: Energy

b. Predictors: (Constant), Capital, GDP

China

Table 6: ANOVA

Regression 0.010 2 0.005 39.386 0.000^b

Table 6 show the value of F-statistic is 39.386 and p-value at 0.000 is < 0.05, then showed the independent variables are strongly impact to the energy consumption at China.

Pakistan

Table 7: ANOVA

Regression 0.076 2 0.038 366.490 0.000^b

Table 7 show the value of F-statistic is 366.490 and p-value at 0.000 is < 0.05, then showed the independent variables are strongly impact to the energy consumption at Pakistan.

4.3 Regression Analysis

Table 8 show the capital stock is a positive impact with energy consumption and having significant at 0.000 and it supported by Jayed (2020), and Narayan (2008). Capital stock is significant impact with GDP and having significant at 0.001. This result supported by Mahalingam (2018) and Ohler (2014).

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Malaysia

Table 8: Coefficients^a

Unstandardized Coefficients

B

Unstandardize d Coefficients Std. Error

t

Significance

1 (Constant) -0.363 1.206 -0.301 0.075

GDP -0.487 0.169 -2.891 0.000

Capital 1.306 0.344 3.791 0.001

China

B

t

Significance

1 (Constant) 7.906 0.118 67.255 0.000

GDP -0.293 0.034 -8.598 0.000

Capital 0.034 0.046 7.994 0.000

Table 9 show the capital stock is a positive impact with energy consumption and having significant at 0.000 and it supported by Wong (2013) and Narayan (2008). Energy consumption is significant impact with GDP and having significant at 0.000. This result supported by Qi et.al (2022) and Nazar (2021).

Pakistan

B

t

Significance

1 (Constant) ^1.021 ^0.342 ^2.998 ^0.008

GDP -0.016 0.048 -0.334 0.742

Capital 0.858 0.138 6.194 0.000

Table 10 show the capital stock is a positive impact with energy consumption and having significant at 0.000 and it supported by Elfaki (2021). Energy consumption is insignificant impact with GDP and having insignificant at 0.742.

4. Conclusion

The paper analyses of GDP and capital stock on energy usage in Malaysia, China and Pakistan for 20 years. The result shows that all independent variables which are economic growth and capital stock have a positive impact towards energy consumption in Malaysia, China except GDP has insignificant impact at Pakistan. In future studies, it is recommended to study the impact of energy consumption with different variable such as towards savings, fiscal deficits

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and trade openness. It may show the different result whenever it is positive or negative result depends on the variables. Besides, future research can be increasing their time frame of period.

It may show the different result at the end of the research.

Grouping nations by GDP per capita, which takes regional development differences into account, demonstrates that there is a strong effect between capital stock and energy consumption in the higher economic growth nations. In nations with less advanced economies, the effect of economic expansion on energy use is particularly notable. For policymakers trying to understand how nations progress economically, the findings have significant ramifications.

To ensure sustained long-term growth in the economy, nations must create an integrated energy and economic policy.

Acknowledgement

I thank you to Universiti Tenaga Nasional for Pocket Grant awarded under this study.

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