Luận văn thạc sĩ UEH energy consumption and real GDP in asean

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UNIVERSITY OF ECONOMICS

HO CHI MINH CITY

VIETNAM

INSTITUTE OF SOCIAL STUDIES

THE HAGUE

NETHERLANDS

VIETNAM – NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

ENERGY CONSUMPTION AND

REAL GDP

IN ASEAN

By

DUONG THIEN CHI

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

Ho Chi Minh City, December 2015

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UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIET NAM NETHERLANDS

VIETNAM – NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

ENERGY CONSUMPTION AND

REAL GDP

IN ASEAN

By

DUONG THIEN CHI

Supervisor

Dr. NGUYEN NGOC THUY

Ho Chi Minh City, December 2015

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ACKNOWLEDGEMENT

First of all, I would like to say gratefully thank to my supervisor Dr. Nguyen Ngoc Thuy.

I cannot finish my thesis if do not get the support and the advice from teacher.

Besides that, I want to say thank to Dr. Vo Hong Duc who give me many useful and

importance advice that help me very much through the time that I do the thesis.

And I want to thank professors and the teacher staff of Viet Nam – Netherlands Program

that gave many supports to me when I get difficult not only when I do the thesis but also

in studying progress.

Last, I want to thank my friends and my family always besides me.

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ABBREVIATIONS

ASEAN: The Association of Southeast Asian Nations

ARDL: Autoregressive distributed lag

ADF: Augmented Dickey-Fuller

LLC: Levin at al.

FMOLS: Fully Modified Ordinary Least Square

WB: World Bank

VAR: Vector Autoregression

VECM : Vector Error Correction Model

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ABSTRACT

This paper aims to examine the relationship between real GDP and energy consumption

in ASEAN. The paper use the panel data collected from WorldBank from 1974 to 2014.

The panel unit root tests, panel cointegration test and VECM Granger Causality test will

be applied in this paper. The result showed that there is a long-run causality from real real

GDP to energy consumption and short-run unidirection causality from real GDP to

energy consumption. Besides that, there is positive effect of energy consumption, import,

capital, human capital and negative effect of CO2 emission and export on real GDP in

ASEAN.

Key word: economic growth, energy consumption, VECM, FMOLS.

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Table of Contents

Chapter 1: Introduction............................................................................................................... 1

1.1.Problem statements.......................................................................................................... 1

1.2. Research objectives ........................................................................................................ 2

1.2.1. Research objectives ..................................................................................................... 2

1.2.2. Main research question ................................................................................................ 2

1.3 Scope of study.................................................................................................................. 3

1.4 The structure of study....................................................................................................... 3

Chapter 2: Literature Reviews.................................................................................................... 4

2.1 Growth theory................................................................................................................... 4

2.2 Review of empirical studies .............................................................................................. 5

2.2.1 Energy, economic growth and real GDP........................................................................ 5

2.2.2 The papers that appied different methodologies ............................................................ 7

2.2.3 The papers that was added more variables ................................................................... 9

Chapter 3: Data and Methodology.............................................................................................14

3.1. Data................................................................................................................................14

Table 2 : Descriptive statistics on data ........................................................................................17

GDP.......................................................................................................................................17

ENERGY................................................................................................................................17

EXPORT ................................................................................................................................17

HUMAN_...............................................................................................................................17

IMPORT.................................................................................................................................17

CO2 ........................................................................................................................................17

CAPITAL...............................................................................................................................17

3.2. Methodology...................................................................................................................18

3.2.1.Panel unit root test:.......................................................................................................18

3.2.2. Panel cointegration tests .............................................................................................19

3.2.3. Granger Causality test.................................................................................................22

3.2.4 Fully modified ordinary least square (FMOLS)..............................................................24

Chapter 4 : Overview of Energy Consumption...........................................................................25

and real GDP in Asean.............................................................................................................25

4.1. Individual country............................................................................................................25

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4.1.1 Brunei...........................................................................................................................25

4.1.2 Cambodia.....................................................................................................................26

4.1.3 Indonesia......................................................................................................................27

4.1.4 Lao PDR.......................................................................................................................28

4.1.5 Malaysia .......................................................................................................................28

4.1.6 Myanmar ......................................................................................................................29

4.1.7 Philippines ....................................................................................................................30

4.1.8 Singapore.....................................................................................................................32

4.1.9 ThaiLand ......................................................................................................................33

4.1.10 Viet Nam.....................................................................................................................34

4.2. Country in aggregate ......................................................................................................35

Chapter 5:Empirical Results......................................................................................................39

5.1. Panel Unit Root test........................................................................................................39

5.2. Panel cointegration test ..................................................................................................39

5.3. Granger causality test.....................................................................................................40

5.4. Fully modified ordinary least square (FMOLS):...............................................................42

Chapter 6: Conclusions and Policy Implications ........................................................................45

6.1 Conclusions.....................................................................................................................45

6.2 Policy Implicantions .........................................................................................................45

6.3 Limitations of the study....................................................................................................46

References ...............................................................................................................................47

Appendices ...............................................................................................................................52

Appendices 1 : Unit root test for Capital variable at level .......................................................52

Appendices 2 : Unit root test for Capital variable at first different...........................................53

Appendices 3 : Unit root test for Capital variable at level .......................................................54

Appendices 4: Unit root test for CO2 variable at level.............................................................55

Appendices 5: Unit root test for CO2 variable at first different ................................................56

Appendices 6: Unit root test for Energy variable at level........................................................57

Appendices 7: Unit root test for Export variable at level........................................................58

Appendices 8: Unit root test for Export variable at first different............................................59

Appendices 9: Unit root test for real GDP variable at first level ............................................60

Appendices 10: Unit root test for Export variable at level......................................................61

Appendices 11: Unit root test for Human_capital variable at level.........................................62

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Appendices 12: Unit root test for Human_capital variable at first different ............................63

Appendices 13: Unit root test for Import variable at level ......................................................64

Appendices 14: Unit root test for Import variable at first different..........................................65

Appendices 15: Panel Cointegration test...............................................................................66

Appendices 16: Chosen lag order..........................................................................................67

Appendices 17: Vector Error Correction Model (Dependent variable : real GDP)..................68

Appendices 18: Granger Causality Test for long-run .............................................................69

Appendices 19: Granger Causality Test for short-run ............................................................70

Appendices 20: Vector Error Correction Model (Dependent variable : Energy)......................71

Appendices 21: Granger Causality Test for long-run .............................................................72

Appendices 22: Granger Causality Test for short-run ............................................................73

Appendices 23: Panel fully modified least squares ................................................................74

Appendices 24: Sumary of literature review...........................................................................74

Time-series techniques, Hsiao version of the Granger-causality method......................................84

VEC model..........................................................................................................................84

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LIST OF TABLE

Table 1 : Data definition...................................................................................................15

Table 2 : Description data.................................................................................................17

Table 3: Description Energy Consumtion in Asean from 1974 to 2014 (kg of oil

equivalent) ........................................................................................................................35

Table 4 : Description Gross Domestic Product in Asean from 1974 to 2014 (billion

USD).................................................................................................................................36

Table 5: Result of panel LLC (2002) unit root test ..........................................................38

Table 6: Panel Pedroni (1999) cointegration test .............................................................39

Table 7: Result of Granger causality test with VECM.....................................................39

Table 8: Result of Fully modified ordinary least square ..................................................41

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