Relationship Between Energy Consumption and Economic Growth: Empirical Evidence for Singapore

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UNIVERSITI MALAYSIA SABAH LABUAN INTERNATIONAL CAMPUS
Current Issues in International Financial Economics GD 30203 Semester 2, 2012/2013
Group Assignment Relationship between Energy Consumption and Economic Growth: Empirical Evidence for Singapore

Prepared for:

Mr. Ling Tai Hu
Prepared by: No. Name Matrix No. Course Sign

1. 2.

YAP YE LI BONG HEE CHUEN

BG10110560 BG10110038

HE 22 HE 22

15 MAY 2013

Date of Submission: th

Current Issues GD 30203

ABSTRACT
The objective of this study is to examine the relationship between energy consumptions and economic growth and address the policy implication on energy consumption in Singapore by using times series data from the period of 1980 to 2011. Johansen Co-integration model been used to analyze the data. The results show that energy consumptions are related to economic growth. The Granger Causality model been used to examine the causal effect of energy consumption in form of disaggregate and gross domestic product. The results show that coal consumption and gas consumption does not Granger cause to economic growth in Singapore, and vice versa. However, there are two unidirectional relationships found. First, causality runs from economic growth to oil consumption. Second, causality runs from electricity consumption to economic growth. Therefore, any policy will lead to a reduction in electricity used will negative impact to economic growth in Singapore.

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Current Issues GD 30203

Table of Contents
1.0 1.1 2.0 3.0 4.0 4.1 4.2 Introduction .......................................................................................................................... 3 Trend and Pattern of Energy in Singapore ....................................................................... 4 Literature Review................................................................................................................. 6 Theoretical Framework ........................................................................................................ 9 Methodology and Data Sources ........................................................................................... 9 Data Sources ................................................................................................................... 10 Methodology .................................................................................................................. 10 Augmented Dicker-Fuller Unit Root Test .............................................................. 10 Johansen Co-integration Test .................................................................................. 11 Granger Causality Test ........................................................................................... 11

4.2.1 4.2.2 4.2.3 5.0 5.1 5.2 5.3 6.0

Result ................................................................................................................................. 12 Stationary Test................................................................................................................ 12 Co-integration Test ......................................................................................................... 13 Granger Causality Test ................................................................................................... 13 Conclusion ......................................................................................................................... 15

References ..................................................................................................................................... 16 Appendices .................................................................................................................................... 18

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Current Issues GD 30203

1.0

Introduction

As general, energy plays an essential role on both demand and supply side in an economic. On demand side, consumer decides to buy energy to maximize...
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