Abstract:

This study investigates the relationship between energy consumption and economic growth in Kyrgyzstan economy by means of sustainability perspective. Namely the purpose of this study is the investigate long run relationship between economic growth and energy consumption and production. For this purpose we employed real GDP, hydraulic energy production, crude oil import, coal, crude oil and electricity consumption yearly data that covers the period of 1995-2012. In the first part of the study, we determine the stationarity of the series by ADF unit root test and we find that series are stationary at their first difference. At the second step causality relationship between variables is hold with Granger test and we determined that there is Granger causality that run from real GDP to hydraulic energy production, coal production to real GDP and real GDP to electricity consumption. At third step we estimate the cointegration relationship by introducing Johansen cointegration test and we find that there is a cointegration relationship between real GSP, crude oil import and hydraulic energy production. Also VEC model performs as removing imbalances between long and short run period. With regard to VEC model error correction coefficient is -0,4876 and probability value is 0,0233. This means that (i) there is long run relationship goes from coal consumption, electricity consumption and crude oil consumption to real GDP per capita, (ii) error correction mechanism is working and deviation from long run equilibrium was corrected by % 48.76 in one year. Lastly we estimate cointegration coefficient by using Stock-Watson Dynamic OLS (DOLS). According to DOLS model there is long run relationship which runs from energy consumption to economic growth. 

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