Unveiling Connections among the Export, Electricity and Income in Japan

Abstract

The existing literature on the relationship between electricity consumption, exports, and economic growth presents inconclusive findings. This study aims to clarify this nexus by analyzing the interconnections among exports, electricity consumption, and per capita real income in Japan from 1960 to 2007. Using the bounds testing procedure by Pesaran et al. (2001), the research confirms a cointegrating relationship among these variables. Once cointegration is established, the study employs a Vector Error Correction Model (VECM) to examine the causal dynamics among electricity consumption, exports, and economic growth. The results indicate that, in the long run, causality flows from exports and real GDP per capita to electricity consumption. This finding highlights the significant interdependencies among these key economic variables, suggesting that economic growth and export activities drive electricity consumption in Japan over time. The implications of this study emphasize the necessity for Japan to align its energy policies with its export-driven economic structure. Efficient electricity management and sustainable energy investments are crucial for supporting long-term economic growth. By ensuring a stable and efficient energy supply, Japan can maintain its industrial competitiveness and economic expansion. These findings contribute to the broader discourse on energy economics by providing empirical evidence on the role of exports and economic growth in shaping electricity consumption trends.