Energy Consumption and Economic Growth Nexus in Bangladesh

Abstract The empirical investigation that examines the dynamics including the interaction between consumption of energy and economic progress has long been assessed. However, the interaction of these two in developing countries in general and Bangladesh, in particular, is a less explored subject. Hence, with this notion, this study examined the causal relationship among economic growth and energy consumption in Bangladesh. For this purpose, the study used energy consumption, gross domestic product (GDP), labor force, and capital data from 1981 to 2017 from different sources and data is analyzed by augmented Dickey-Fuller (ADF) unit root test, Johansen co-integration test and Granger test of causality. Results determine that energy consumption and economic growth have long term bi-directional relationship. The econometric model is estimated using generalized least squares (GLS) model. It is concluded that, consumption of energy and economic growth positively correlated and economic development highly depend on energy consumption in Bangladesh.