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Analysing energy consumption in the Philippines using vector error correction

International Social Science Journal (Chinese Edition)

No.4, 2019

 

Analysing energy consumption in the Philippines using vector error correction (Abstract)

 

Ronaldo Cabauatan and Virgilio M. Tatlonghari

 

This research examines the causality between energy consumption and economic growth in the Philippines, and determines their long-run relationship by including labour force and gross fixed capital formation. Results show that the variables were found to be stationary at first difference and that cointegration existed among the variables, suggesting causality in at least one direction. They also show that GDP is dependent on energy consumption, indicating that the growth hypothesis applies in the Philippines. Moving from non-renewable to renewable energy without securing the supply of energy can possibly limit economic growth. This inference is crucial in policy development, particularly when it comes to energy conservation and switching to renewable energy sources. Considering that the Philippines remains a developing country and needs to produce energy at least cost, policy-makers must ensure the supply of energy before deciding to switch to renewable energy and must also consider the high cost of generating renewable energy.