The Effect of Energy Consumption on Economic Growth: Empirical Evidences from 13 Selected Emerging Economies 1997-2013

Due to the essence of developing countries’ economic structure, the role of energy consumption in their economies is crucial. Indeed, the aim of this study is to probe the association between economic growth, energy consumption, investment, inflation rate, trade openness, and government consumption. In order to search the factors effecting economic growth, panel data approach methods have been employed; consequently, a sample data of thirteen developing countries, namely Argentina, Bolivia, Brazil, Chile, China, Hungary, Indonesia, Malaysia, Mexico, Poland, South Africa, South Korea, Taiwan, Thailand, and Turkey, is selected on an annual basis, from 1997 to 2013. Fixed Effects Model and Random Effects Model are used as analytical methods to specify the models in which economic growth is a dependent variable while energy consumption, investment, inflation rate, trade openness, and government consumption are independent variables supposedly. The results reveal that energy consumption and investment have significantly positive growth effect on the economy, while trade openness and government consumption have significantly negative effect on the economic growth of these thirteen emerging economies. Moreover, the nexus among inflation and economic growth is rejected. Keywords: Economic growth, Energy consumption, Emerging economies