The Dynamic Link between Electricity Production, Financial Development, Trade Openness and Economic Growth: The Evidence from Lao PDR
Article Sidebar
Published:
Oct 7, 2020
Keywords:
The Dynamic Electricity Production Financial Development Trade Openness
Main Article Content
Abstract
The purpose of this paper is to examine the causality between electricity production, financial development, trade openness and economic growth in Lao PDR during 1984 to 2015. We use the bounds test and auto- regressive distributed lag (ARDL) for approaching to co-integration in the long-run, the vector error correction model (VECM) for testing the direction of causality among the series. The results of the paper showed that there is co-integrated between electricity production, financial development, trade openness and economic growth. Moreover, there is bi-directional causality between electricity and economic growth in the long run, and we found uni-directional causality running from financial development and trade openness inelectricity production and economic growth. The policy implication of this result is that development strategies should prioritize on financial development and trade openness, and this study also supports the view of government to invest in electricity generation which will promote economic growth in the long term.
Article Details
How to Cite
Bouapao, L. . (2020). The Dynamic Link between Electricity Production, Financial Development, Trade Openness and Economic Growth: The Evidence from Lao PDR. International Journal of Multidisciplinary in Management and Tourism, 2(2), 47–60. https://doi.org/10.14456/10.14456/ijmmt.2021.1
Section
Articles
References
[1] Millar, J., &Photakoun, V. Livestock development and poverty alleviation: revolution or evolution for upland livelihoods in Lao PDR?. International Journal of Agricultural Sustainalbilty. 6:1, 2008, 89-102.
[2] Anderson, M., &Kokko, A. Determinants of poverty in Lao DPR. Lund University Libraries. 223,2006,223.
[3] Anderson, M., &Kokko, A. IN THE SHADOW OF CHINA: TRADE AND GROWTH IN LAO PDR. 2009-4.
[4] Kyophilavong, P., Shahbaz, M., Kim., B., &Jeong-Soo OH. Renewable and Sustainable Energy Reviews. 2017.
[5] Sak, N., Karymshakov, K., &Caglyan. E. Asian Economic and Financial Review 2(5):591-602.
[6] Saysombath, PH., Kyophilavong, M. The Causal Link between Spending and Revenue: The Lao PDR. International Journal of Economics and Finance; Vol. 5, No. 10; 2013.
[7] Leechuefon P. Export of electricity: positive and negative contributions to the Lao PDR, national human development report. Vientiane: International Trade and Human Development; 2006.
[8] Watcharejyothin, M., Shrestha R-M. Effects of cross-border power trade between Laos and Thailand: energy swcurity and environmental implication. Energy Policy 2009;37(5):1782-92.
[9] Altintas, H. and M. Kum. “Multivariate Granger Causality between Electricity Generation, Export, Prices and Economic Growth in Turkey”. International Journal of Energy Economics and Policy, Vol.3, Special Issue, 2013, 233-238.
[10] Pesaran, M., and Y. Shin. 1999“An Autoregressive Distributed Lag Modelling Approach to Co-integration Analysis” Chapter 11 in Economics and Economic Theory in the 20th Century: The RangnarFrich centennial symposium, S. Strom(Ed.). Cambridge University.
[11] Chirwa, T.G. 2006“The Macroeconomic Divers of Economic Growth In SADC Countries”. University of South Africa.
[12] Pesaran, M.H., Y. Shin and R. J. Smith. 2001. “Bounds Testing Approaches to the Analysis of Level Relationships”. Journal of Applied Econometrics, Vol. 16, No. 3, pp. 289-326.
[13] Collier, P., and B. Goderies. 2012. “Commodity Prices and Growth: An emipircal investigation.” European Economic Review, Vol. 56, NO.6, pp. 1241-1260.
[14] Gujarati, D. N. 2004. Basic Econometrics, Fourth Edition. New York: The McGraw Hill of Companies.
[15] Brown, R. L., J. Durbin, and J. M. Evans. 1975. “Techniques for Testing the Constancy of Regression Relationships over Time.” Journal of the Royal Statistical Society, Series B, Vol.37, NO. 2, pp. 3-26.
[16] Shabaz M, Khan S, Tahir M.I. The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis. Energy Economics 40 (2013) 8–21.
[17] Pesaran, M.H., Y.Shin and R. J. Smith. 2001. “Bounds Testing Approaches to the Analysis of Level Relationships”. Journal of Applied Econometrics, Vol. 16, No, 3, pp. 300.
[18] Dickey D, Fuller W-A. Distruibution of the estimates for autoregressive time series with a unit root. J Am Stat Assoc1979;74:427-31.
[20] Lean HH, Smyth R. Multivariate Granger causality between electricity generation, exports, prices and GDP in Malaysia. Energy 35 (2010) 3640e3648.
[21] Yoo S-H, Kim Y., Electricity generation and economic growth in Indonesia. Energy 2006;31:2890e9.
[22] Ghosh S. Electricity supply, employment and real GDP in India: evidence from cointegration and Granger causality tests. Energy Policy 2009;37:2032e7.
[23] Alam K, Sarker A-R. Nexus between Electricity Generation and Economic Growth in Bangladesh. Asian Social Science 2010;6;12.
[24] Morimoto R, Chris H. The impact of electricity supply on economic growth in Sri Lanka. Energy Econom2014;26:77-85.
[25] Cheng, Y.S., Wong, W.K., Woo, C.K. How much have electricity shortages hampered China's GDP growth?. Energy Policy 2013;55:369-373.
[26] Yang, Y.Y., Yi, M.H. Does financial development cause economic growth? Implication for policy in Korea. ScienceDirect 30 (2008) 827–840.
[27] Thangavelu, S.M., Jiunn, A.B., Jame. Financial development and economic growth in Australia: An empirical analysis. Empirical Economics (2004) 29:247– 260.
[28] Ang, J.B. Financial development and the FDI-growth nexus: the Malaysian experience. Applied Economics, 41:13, 1595-1601
[29] Chang, T., Caudill, S.B. Financial development and economic growth: the case of Taiwan. Applied Economics, 37:12, 1329-1335.
[30] Handa, J. S.R. Khan, S.R. Financial development and economic growth: a symbiotic relationship. Applied Financial Economics, 18:13, 1033-1049.
[31] Odhiambo. N.M., Finance-investment-growth nexus in South Africa: an ARDL-bounds testing procedure. Econ Change Restruct (2010) 43:205–219.
[32] Gries, T., Kraft, M., Meierreks, D. Financial deepening, trade openness and economic growth in Latin America and the Caribbean. Applied Economics, 2011, 43, 4729–4739.
[33] Shabrid Abd. Majid, M. Does Financial Development and Inflation Spur Economic Growth in Thailand?. Chulalongkorn Journal of Economics 19(2), 8(2007): 161-184.
[34] Liang, Q., Teng, J.Z. Financial development and economic growth: Evidence from China. China Economic Review 17 (2006) 395–411.
[35] Bader, S.A., Abu-Qarn, A.S. Financial development and economic growth: The Egyptian experience. Journal of Policy Modeling 30 (2008) 887–898.
[36] Singh, T. Financial development and economic growth nexus: a time-series evidence from India. Applied Economics, 40:12, 1615-1627.
[37] Abd. Majid, M.S., Mahrizal. Does financial development cause economic growth in the asean-4 coutries?. Savings and Development, 31, 4 (2007),369-398.
[38] Chang, T. Financial development and economic growth in Mainland China: a note on testing demandfollowing or supply-leading hypothesis. Applied Economics Letters, 9:13, 869-873.
[39] Jenkins, H.P., Katircioglu, S.K. The bounds test approach for cointegration and causality between financial development, international trade and economic growth: the case of Cyprus. Applied Economics, 2010, 42, 1699–1707.
[40] Menyah, K., Nazlioglu, S., Wolde-Rufael, Y. Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling 37 (2014) 386–394.
[41] Yucel, F. Causal Relationships between Financial Development, Trade Openness and Economic Growth: The Case of Turkey. Journal of Social Sciences 5(1): 33-42, 2009.
[42] Dritsaki, M., Dritsaki, C., Adamopulos, A. A causal relationship between Trade, Foreign Direct Investment and Economic Growth for Greece. American Journal of Applied Sciences 1(3) 230-235, 2004.
[43] Shabaz, M., Khan, S., Tahir, M.I. The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis. Energy Economics 40 (2013) 8–21.
[44] Belloumi, M. The relationship between trade, FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model. Economic Systems 5(2014) 269-287.
[45] Shabaz, M. Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan. MPRA 37391:16,3(2012).
[46] Abdulkadhim, H.H., Al-Jafari, M.K. Financial Development, Trade Openness and Economic Growth: A Trilateral Analysis of Bahrain. International Journal of Economics and Finance 7:1; 2015.
[47] Chimobi, O.P. The causal Relationship among Financial Development, Trade Openness and Economic Growth in Nigeria. International Journal of Economics and Finance 2:2;4(2010).
[48] Awokus, T. Trade Openness and Economic Growth: Is Growth Export-led or Import-led?. Applied Economy, 2007, 40:2, 161-173.
[49] Orr S, Pittock J, Chapagain A, Dumaresq D. Dams on the Mekong River: lost fish protein and the implications for land and water sources. Glob Environ Change 2012;37(5):1782-92.
[50] Kyophilavong, M., Shabaz, M., &Uddin, GS. The Nexus Between Financial Development and Economic Growth in Laos. 2014-447.
[51] Okonjo, I., Ngozi, Kwakwa, V., Bechwith, A., Ahmed, Z., Impact of Asia’s financial crisis on Cambodia and the Lao PDR. Finance and Development; Washington, D.C. Vol. 36, Iss. 3, (Sep 1, 1999): 48.
[52] Fan, G. Trade Liberalization, Economic Reform and Poverty Reduction in Lao PDR. 11(2), 2007,213-226.
[2] Anderson, M., &Kokko, A. Determinants of poverty in Lao DPR. Lund University Libraries. 223,2006,223.
[3] Anderson, M., &Kokko, A. IN THE SHADOW OF CHINA: TRADE AND GROWTH IN LAO PDR. 2009-4.
[4] Kyophilavong, P., Shahbaz, M., Kim., B., &Jeong-Soo OH. Renewable and Sustainable Energy Reviews. 2017.
[5] Sak, N., Karymshakov, K., &Caglyan. E. Asian Economic and Financial Review 2(5):591-602.
[6] Saysombath, PH., Kyophilavong, M. The Causal Link between Spending and Revenue: The Lao PDR. International Journal of Economics and Finance; Vol. 5, No. 10; 2013.
[7] Leechuefon P. Export of electricity: positive and negative contributions to the Lao PDR, national human development report. Vientiane: International Trade and Human Development; 2006.
[8] Watcharejyothin, M., Shrestha R-M. Effects of cross-border power trade between Laos and Thailand: energy swcurity and environmental implication. Energy Policy 2009;37(5):1782-92.
[9] Altintas, H. and M. Kum. “Multivariate Granger Causality between Electricity Generation, Export, Prices and Economic Growth in Turkey”. International Journal of Energy Economics and Policy, Vol.3, Special Issue, 2013, 233-238.
[10] Pesaran, M., and Y. Shin. 1999“An Autoregressive Distributed Lag Modelling Approach to Co-integration Analysis” Chapter 11 in Economics and Economic Theory in the 20th Century: The RangnarFrich centennial symposium, S. Strom(Ed.). Cambridge University.
[11] Chirwa, T.G. 2006“The Macroeconomic Divers of Economic Growth In SADC Countries”. University of South Africa.
[12] Pesaran, M.H., Y. Shin and R. J. Smith. 2001. “Bounds Testing Approaches to the Analysis of Level Relationships”. Journal of Applied Econometrics, Vol. 16, No. 3, pp. 289-326.
[13] Collier, P., and B. Goderies. 2012. “Commodity Prices and Growth: An emipircal investigation.” European Economic Review, Vol. 56, NO.6, pp. 1241-1260.
[14] Gujarati, D. N. 2004. Basic Econometrics, Fourth Edition. New York: The McGraw Hill of Companies.
[15] Brown, R. L., J. Durbin, and J. M. Evans. 1975. “Techniques for Testing the Constancy of Regression Relationships over Time.” Journal of the Royal Statistical Society, Series B, Vol.37, NO. 2, pp. 3-26.
[16] Shabaz M, Khan S, Tahir M.I. The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis. Energy Economics 40 (2013) 8–21.
[17] Pesaran, M.H., Y.Shin and R. J. Smith. 2001. “Bounds Testing Approaches to the Analysis of Level Relationships”. Journal of Applied Econometrics, Vol. 16, No, 3, pp. 300.
[18] Dickey D, Fuller W-A. Distruibution of the estimates for autoregressive time series with a unit root. J Am Stat Assoc1979;74:427-31.
[20] Lean HH, Smyth R. Multivariate Granger causality between electricity generation, exports, prices and GDP in Malaysia. Energy 35 (2010) 3640e3648.
[21] Yoo S-H, Kim Y., Electricity generation and economic growth in Indonesia. Energy 2006;31:2890e9.
[22] Ghosh S. Electricity supply, employment and real GDP in India: evidence from cointegration and Granger causality tests. Energy Policy 2009;37:2032e7.
[23] Alam K, Sarker A-R. Nexus between Electricity Generation and Economic Growth in Bangladesh. Asian Social Science 2010;6;12.
[24] Morimoto R, Chris H. The impact of electricity supply on economic growth in Sri Lanka. Energy Econom2014;26:77-85.
[25] Cheng, Y.S., Wong, W.K., Woo, C.K. How much have electricity shortages hampered China's GDP growth?. Energy Policy 2013;55:369-373.
[26] Yang, Y.Y., Yi, M.H. Does financial development cause economic growth? Implication for policy in Korea. ScienceDirect 30 (2008) 827–840.
[27] Thangavelu, S.M., Jiunn, A.B., Jame. Financial development and economic growth in Australia: An empirical analysis. Empirical Economics (2004) 29:247– 260.
[28] Ang, J.B. Financial development and the FDI-growth nexus: the Malaysian experience. Applied Economics, 41:13, 1595-1601
[29] Chang, T., Caudill, S.B. Financial development and economic growth: the case of Taiwan. Applied Economics, 37:12, 1329-1335.
[30] Handa, J. S.R. Khan, S.R. Financial development and economic growth: a symbiotic relationship. Applied Financial Economics, 18:13, 1033-1049.
[31] Odhiambo. N.M., Finance-investment-growth nexus in South Africa: an ARDL-bounds testing procedure. Econ Change Restruct (2010) 43:205–219.
[32] Gries, T., Kraft, M., Meierreks, D. Financial deepening, trade openness and economic growth in Latin America and the Caribbean. Applied Economics, 2011, 43, 4729–4739.
[33] Shabrid Abd. Majid, M. Does Financial Development and Inflation Spur Economic Growth in Thailand?. Chulalongkorn Journal of Economics 19(2), 8(2007): 161-184.
[34] Liang, Q., Teng, J.Z. Financial development and economic growth: Evidence from China. China Economic Review 17 (2006) 395–411.
[35] Bader, S.A., Abu-Qarn, A.S. Financial development and economic growth: The Egyptian experience. Journal of Policy Modeling 30 (2008) 887–898.
[36] Singh, T. Financial development and economic growth nexus: a time-series evidence from India. Applied Economics, 40:12, 1615-1627.
[37] Abd. Majid, M.S., Mahrizal. Does financial development cause economic growth in the asean-4 coutries?. Savings and Development, 31, 4 (2007),369-398.
[38] Chang, T. Financial development and economic growth in Mainland China: a note on testing demandfollowing or supply-leading hypothesis. Applied Economics Letters, 9:13, 869-873.
[39] Jenkins, H.P., Katircioglu, S.K. The bounds test approach for cointegration and causality between financial development, international trade and economic growth: the case of Cyprus. Applied Economics, 2010, 42, 1699–1707.
[40] Menyah, K., Nazlioglu, S., Wolde-Rufael, Y. Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling 37 (2014) 386–394.
[41] Yucel, F. Causal Relationships between Financial Development, Trade Openness and Economic Growth: The Case of Turkey. Journal of Social Sciences 5(1): 33-42, 2009.
[42] Dritsaki, M., Dritsaki, C., Adamopulos, A. A causal relationship between Trade, Foreign Direct Investment and Economic Growth for Greece. American Journal of Applied Sciences 1(3) 230-235, 2004.
[43] Shabaz, M., Khan, S., Tahir, M.I. The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis. Energy Economics 40 (2013) 8–21.
[44] Belloumi, M. The relationship between trade, FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model. Economic Systems 5(2014) 269-287.
[45] Shabaz, M. Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan. MPRA 37391:16,3(2012).
[46] Abdulkadhim, H.H., Al-Jafari, M.K. Financial Development, Trade Openness and Economic Growth: A Trilateral Analysis of Bahrain. International Journal of Economics and Finance 7:1; 2015.
[47] Chimobi, O.P. The causal Relationship among Financial Development, Trade Openness and Economic Growth in Nigeria. International Journal of Economics and Finance 2:2;4(2010).
[48] Awokus, T. Trade Openness and Economic Growth: Is Growth Export-led or Import-led?. Applied Economy, 2007, 40:2, 161-173.
[49] Orr S, Pittock J, Chapagain A, Dumaresq D. Dams on the Mekong River: lost fish protein and the implications for land and water sources. Glob Environ Change 2012;37(5):1782-92.
[50] Kyophilavong, M., Shabaz, M., &Uddin, GS. The Nexus Between Financial Development and Economic Growth in Laos. 2014-447.
[51] Okonjo, I., Ngozi, Kwakwa, V., Bechwith, A., Ahmed, Z., Impact of Asia’s financial crisis on Cambodia and the Lao PDR. Finance and Development; Washington, D.C. Vol. 36, Iss. 3, (Sep 1, 1999): 48.
[52] Fan, G. Trade Liberalization, Economic Reform and Poverty Reduction in Lao PDR. 11(2), 2007,213-226.