Vietnam's Development Trajectory: Threshold Cointegration and Causality Analysis of Energy Consumption and Economic Growth

Abstract

This study delves into the energy consumption-growth nexus in Vietnam, exploring the causal relationship between the logarithm of per capita energy consumption and the logarithm of per capita GDP over the period 1976-2008. The methodology employed involves threshold cointegration. The estimation outcomes reveal the presence of cointegration between per capita energy consumption and per capita GDP in Vietnam. Notably, the study identifies a time-varying effect, signifying a significant difference in the relationship between per capita GDP and per capita energy consumption before and after a structural breakpoint in 1992. The research findings robustly endorse the neoclassical perspective, asserting that energy consumption does not pose a hindrance to economic growth in Vietnam. Consequently, a pivotal policy implication arising from this analysis is that the government can strategically pursue energy conservation policies. These policies, aimed at curbing energy usage for environmentally friendly development, can be implemented without inducing adverse impacts on economic growth. It is imperative to ensure the judicious allocation of energy resources into the more productive sectors of the economy to maximize efficiency.