Current Volume 9
Short-Run Dynamics and Long-Run Equilibrium in Energy-Growth Nexus: A Comparative Application of VAR, VECM, and ARDL with Unit Roots
Abstract
This study investigates the short-run dynamics and long-run equilibrium relationships between energy consumption, fixed capital, inflation rate, labor force, and economic growth (GDP) in Nigeria over the period 1984–2023. Given the pervasive presence of unit roots in macroeconomic time series, this research applies three complementary econometric frameworks—Vector Autoregressive (VAR), Vector Error Correction Model (VECM), and Autoregressive Distributed Lag (ARDL)—to model the energy-growth nexus. The Augmented Dickey-Fuller (ADF) unit root test confirms that all variables are integrated of order one, I(1). The Johansen cointegration test reveals two cointegrating equations, indicating a stable long-run equilibrium relationship among the variables. VECM estimates show that a 1% increase in fixed capital, energy consumption, and inflation rate leads to long-run GDP increases of 3.93%, 0.91%, and 0.77%, respectively. The error correction term (−0.3468) indicates that approximately 34.7% of short-run disequilibrium is corrected annually. ARDL bounds testing confirms cointegration (F-statistic = 4.319 > 4.01), with fixed capital exerting a significant positive long-run impact (3.41%, p = 0.0013). VAR estimation at optimal lag 5 reveals that inflation and labor force are useful predictors of GDP. The study contributes methodologically by demonstrating how unit roots can be properly addressed across three distinct modeling approaches, providing robust evidence that energy consumption and capital formation are critical drivers of Nigeria's long-run economic growth.
Keywords
Unit Root, Energy Consumption, Economic Growth, VECM, ARDL, VAR, Cointegration, Nigeria
Citations
IRE Journals:
R.Y Saidu, Yahaya Muhammad Musa, N.I Audi, Umaru Sani "Short-Run Dynamics and Long-Run Equilibrium in Energy-Growth Nexus: A Comparative Application of VAR, VECM, and ARDL with Unit Roots" Iconic Research And Engineering Journals Volume 9 Issue 12 2026 Page 2430-2438 https://doi.org/10.64388/IREV9I12-1718950
IEEE:
R.Y Saidu, Yahaya Muhammad Musa, N.I Audi, Umaru Sani
"Short-Run Dynamics and Long-Run Equilibrium in Energy-Growth Nexus: A Comparative Application of VAR, VECM, and ARDL with Unit Roots" Iconic Research And Engineering Journals, 9(12) https://doi.org/10.64388/IREV9I12-1718950
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