Abstract:
The main objective of this study to investigate the impact of energy
consumption on economic growth in Sri Lanka. For this study, gross domestic
product is used as a dependent variable, and energy consumption (EC), energy
intensity (EI), export (X), import (M), inflation (INF) and law carbon usage
(LCU) are used as independent variables. The Central Bank Annual Report
and the World Bank used to collect data from 1990 to 2019. This study
examined the long-run relationship of energy consumption with economic
growth using Johansen co-integration and the short-run relationship of
economic growth using a vector error correction model. This research found
that energy consumption, energy intensity, exports, and inflation are
negatively significant on economic growth, and imports of low carbon energy
are positively significant in the long run. In the short run, energy consumption
and inflation are negative influences on economic growth. At the same time,
there is a uni-directional causal relationship between economic growth and
inflation. Therefore, this study suggests that policies involving energy
resources should be reformed to achieve the positive impact of energy
consumption on economic growth in Sri Lanka.
