BUFT Journal of Business and Economics

Dynamic Relationships among Energy Consumption, Gross Capital Formation, Carbon Emissions, and Economic Growth in Bangladesh

Stamford University, Mawlana Bhashani Science and Technology University
Email: mahbubalam13003@gmail.com

Abstract

Purpose: This paper aims to examine the dynamic relationship among energy
consumption, gross capital formation, carbon emissions, and economic growth in
Bangladesh over the period from 1972 to 2022.
Methodology: The study utilizes the autoregressive distributed lag (ARDL)
method and Granger causality tests to find out dynamic interrelationships among
the study variables.
Findings: The co-integration test implies that in the long-run all the variables are
co-integrated. In the long-run, the results reveal that energy consumption and
gross capital formation (GCF) have a positive effect on economic growth, while
carbon emissions (CO2) have an inverse impact on it. The results of short-run
dynamic coefficients of the ARDL model show that CO2 is negatively related to
GDP, while GCF has a positive impact on GDP. The pairwise Granger causality
implies that there exists unidirectional causality from economic growth to energy
consumption. There also exists a unidirectional causality from economic growth
to CO2 and a bidirectional causality from GCF to GDP.
Practical Implication: This study offers a suitable environment that would allow
us to identify the current policy gaps, and a substantial shift in low-carbon
technology, such as energy efficiency and renewable energy, may help reduce
emissions and maintain the long-term viability of the economy.
Originality/Value: Earlier research in this field has abandoned the environmental
synthesis of the relationship between energy use and economic growth. Using the
most recent data set, this study contributes to the small body of literature already
available on the nexus among energy consumption, gross capital formation,
carbon emissions, and economic growth in Bangladesh.
Limitation: The current study employs a specific country; however, further
studies may be conducted using South Asian countries."