Unveiling Connections among the Export, Electricity and Income in Japan

Abstract

The extant body of literature pertaining to the interplay among electricity dynamics, export activities, and economic growth yields inconclusive findings. This research endeavors to contribute to this discourse by meticulously scrutinizing the nexus between exports, electricity consumption, and per capita real income in Japan. Leveraging time series data spanning the years 1960 to 2007, our study aims to provide a nuanced understanding of the intricate relationships within this triad and offer valuable insights into the factors influencing Japan's economic landscape during this temporal continuum. Employing the bounds testing procedure formulated by Pesaran et al. (2001, we ascertained the presence of a cointegrating relationship among electricity consumption, exports, and economic growth. Subsequently, upon establishing cointegration, we delved into an examination of the causal dynamics between electricity consumption, exports, and economic growth within the framework of a Vector Error Correction Model. Our findings reveal that over the long term, there exists a causality emanating from both exports and real GDP per capita to electricity consumption. This underscores the intricate interdependencies shaping the relationships among these pivotal economic variables.