Causality Between Energy Consumption and Output Growth in Indian Cement Industry: An Application of Panel Vector Error Correction Model

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The aim of this paper is to examine the existence and direction of the causal relationship between energy consumption and output growth for Indian cement industry for the period 1979-80 to 2004-05. The most recently developed panel unit root, heterogeneous panel cointegration and panel-based error correction models have been applied in a multivariate framework including capital stock, labor, and material other than energy and output. The empirical results confirm a positive long-run cointegrated relationship between output and energy consumption when heterogeneous state effect is taken into account. It is also found that there exists a long run bi-directional relationship between energy consumption and output growth in Indian cement industry for the study period, implying that an increase in energy consumption directly affects growth of this sector and that growth also stimulates further energy consumption. These empirical findings imply that energy consumption and output are jointly determined and affect each other. Also, energy conservation policies should be associated with consistent encouragement and support from the government for adoption of energy efficient technologies in order to avoid negative impacts of theses policies on the growth of this industry.

ABOUT THE AUTHOR Sabuj Kumar Mandal

Dr. Sabuj Kumar Mandal completed his B.Sc (Economics) from Scottish Church College, Kolkata and M.Sc (Economics with specialization in Statistics and Econometrics) from University of Calcutta in 2002 and 2004 respectively. He has completed his doctoral research from Institute for Social and Economic Change, Bangalore and in 2010 University of Mysore awarded him Ph.D in economics for his thesis entitled “Energy and Productivity Growth: A Study of Indian Cement Industry”. His teaching and research interests lie in a variety of areas like, Microeconomics, Industrial Economics, Applied Game Theory, Behavioral Economics, Applied Econometrics and Energy & Environmental Economics. He is enthusiastic in applying Stochastic Frontier Models and Data Envelopment Analysis for performance analysis and benchmarking.

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Bibliographic information

Title
Causality Between Energy Consumption and Output Growth in Indian Cement Industry: An Application of Panel Vector Error Correction Model
Working Paper
Author
Edition
1st ed.
Publisher
ISBN
8177911945
Length
11p., 30cm.
Subjects