Economic output, export, fossil fuels, non-fossil fuels and energy conservation: evidence from structural break models with VECMs in South Asia

The study aims to examine the energy-GDP-exports nexus employing structural break models after testing for co-integration in the form of total/aggregate annual time series data of South Asia region. The novelty of the study rests in dividing the aggregate energy into fossil fuel- and non-fossil fuel-based energy consumptions with structural break at 2008 considering the global financial crisis into the aggregate production function framework with labor, capital stock, and exports, ceteris paribus. The findings corroborate that in all the three models estimated with aggregate energy, fossil fuel-based energy, and non-fossil fuel-based energy consumptions respectively, there is evidence of long-run linkages among the selected variables. The analyses of long run elasticities estimated demonstrate that labor and capital have positive and significant impact on the real economic output before the break date in all the three models. It is however intriguing that aggregate energy use remains positive before and after the break date while fossil fuel-based energy becomes insignificant after 2008. Likely, non-fossil fuel-based energy corroborates insignificant impact on real economic output after 2008. These findings have important bearings for the energy conservation options in the region of South Asia especially for changing/reducing the fossil fuel share with the non-fossil fuels, ceteris paribus.

Automated summary

This study examines the energy-GDP-exports nexus in the South Asia region using structural break models and finds that labor and capital have significant impacts on real economic output. However, the role of fossil fuels diminishes after 2008, while non-fossil fuels have little impact on real economic output.