Short-Run Dynamics and Long-Run Equilibrium in Energy-Growth Nexus: A Comparative Application of VAR, VECM, and ARDL with Unit Roots

References

[1] Adenikinju, A. F. (1998). Productivity growth and energy consumption in the Nigerian manufacturing sector: A panel data analysis. Energy Policy, 26(3), 199–205.

[2] Akinlo, A. E. (2008). Energy consumption and economic growth: Evidence from 11 Sub-Sahara African countries. Energy Economics, 30(5), 2391–2400.

[3] Akinlo, A. E. (2009). Electricity consumption and economic growth in Nigeria: Evidence from cointegration and co-feature analysis. Journal of Policy Modeling, 31(5), 681–693.

[4] Chontanawat, J., Hunt, L. C., & Pierse, R. (2008). Does energy consumption cause economic growth?: Evidence from a systematic study of over 100 countries. Journal of Policy Modeling, 30(2), 209–220.

[5] Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057–1072.

[6] Engle, R. F., & Granger, C. W. J. (1987). Co-integration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251–276.

[7] Granger, C. W. J., & Newbold, P. (1974). Spurious regressions in econometrics. Journal of Econometrics, 2(2), 111–120.

[8] Iwayemi, A. (2020). Nigeria's dual energy problems: Policy issues and challenges. International Association for Energy Economics, Fourth Quarter, 17–21.

[9] Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2-3), 231–254.

[10] Kraft, J., & Kraft, A. (1978). On the relationship between energy and GNP. The Journal of Energy and Development, 3(2), 401–403.

[11] Mustapha, A. M., & Fagge, A. M. (2015). Energy consumption and economic growth in Nigeria: A causality analysis. Journal of Economics and Sustainable Development, 6(13).

[12] Nelson, C. R., & Plosser, C. I. (1982). Trends and random walks in macroeconomic time series: Some evidence and implications. Journal of Monetary Economics, 10(2), 139–162.

[13] Odularu, G. O., & Okonkwo, C. (2009). Does energy consumption contribute to economic performance? Empirical evidence from Nigeria. Journal of Economics and International Finance, 1(2), 044–058.

[14] Omisakin, D. (2008). Energy consumption and economic growth in Nigeria: A bounds testing cointegration approach. Journal of Economic Theory, 2(4), 118–123.

[15] Onakoya, A. B., Onakoya, A. O., Jimi-Salami, O. A., & Odedairo, B. O. (2013). Energy consumption and Nigerian economic growth: An empirical analysis. European Scientific Journal, 9(4).

[16] Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.

[17] Phillips, P. C. B. (1987). Time series regression with a unit root. Econometrica, 55(2), 277–301.

[18] Stern, D. I. (1993). Energy and economic growth in the USA: A multivariate approach. Energy Economics, 15(2), 137–150.

[19] Stern, D. I. (2000). A multivariate cointegration analysis of the role of energy in the US macroeconomy. Energy Economics, 22(2), 267–283.

[20] Usman, O., Iorember, P. T., & Uzner, G. (2020). Measuring the pass-through of disaggregated energy prices in the US. International Journal of Strategic Energy and Environmental Planning, 2(3), 60–77.

[21] Wolde-Rufael, Y. (2006). Electricity consumption and economic growth: A time series experience for 17 African countries. Energy Policy, 34(10), 1106–1114.

@article{1718950,
      author = {R.Y Saidu, Yahaya Muhammad Musa, N.I Audi, Umaru Sani},
      title = {Short-Run Dynamics and Long-Run Equilibrium in Energy-Growth Nexus: A Comparative Application of VAR, VECM, and ARDL with Unit Roots},
      journal = {Iconic Research And Engineering Journals},
      year = {2026},
      volume = {9},
      number = {12},
      pages = {2430-2438},
      issn = {2456-8880},
      url = {https://www.irejournals.com/formatedpaper/1718950.pdf},
      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},
      month = {June},
      doi = {https://doi.org/10.64388/IREV9I12-1718950}
  }