Examining the Relationship between Natural Gas Production and GDP per Capita in Eurasia

Abstract

The relationship between natural resource production, particularly natural gas, and economic growth is an area of research that has received relatively limited attention in the literature. This study aims to address this gap by analyzing the relationship between natural gas production and GDP per capita in five Eurasian countries over the period 1993-2020. Utilizing Westerlund’s Durbin Hausman cointegration model and a panel autoregressive distributed lag model, the study provides empirical insights into this relationship. The empirical results of the study reveal a significant and long-term relationship between natural gas production and GDP per capita in the five Eurasian countries under investigation. This finding underscores the importance of energy production, particularly natural gas, as a driver of economic growth in these economies. Given the significant role that energy production plays in their economies, the study suggests that policymakers in these countries should prioritize policies aimed at increasing natural gas production. One key policy recommendation emerging from the study is the need for increased infrastructure investments to support the expansion of natural gas production. The aging infrastructure in these countries poses challenges to the efficient production and distribution of natural gas. Therefore, investing in the renewal and modernization of natural gas production and distribution infrastructure is deemed vital for sustaining and enhancing economic growth. Furthermore, the study suggests that new pipeline investments could significantly contribute to economic growth, particularly for countries like Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan. Pipelines play a crucial role in transporting natural gas from production sites to consumers, both domestically and internationally. Therefore, investing in new pipeline projects could not only boost natural gas production but also stimulate economic activity through job creation and increased trade opportunities. This study highlights the importance of natural gas production as a driver of economic growth in the five Eurasian countries under investigation. The empirical evidence suggests a strong and long-term relationship between natural gas production and GDP per capita. To capitalize on this relationship and promote sustainable economic development, policymakers are encouraged to prioritize policies aimed at increasing natural gas production, renewing infrastructure, and investing in new pipeline projects. By doing so, these countries can unlock the full potential of their natural gas reserves and pave the way for continued economic prosperity.