An Empirical Analysis of the Effects of Energy Price Shocks for Sustainable Energy on the Macro-Economy of South Asian Countries

Abstract

Energy prices (EPs) play an imperative role in South Asian Country (SAC) Gross Domestic Product (GDP). This research empirically examines the influence of sustainable energy price shocks (EPSs) on macroeconomic indicators. The study is to forecast the impact of EPS on macroeconomic indicators from 1980 to 2020. The analysis is carried out by employing the Vector Auto-Regression (VAR) approach. Impulse Response Functions (IRFs) results indicate that EPS decreases Gross Domestic Product (GDP). They exist in the short run and the long run. This research study’s overall findings suggest that high EPSs have a negative impact on GDP. The study implies that policymakers should develop, adopt, and initiate some imperatives to control the unanticipated volatility and movements in EP. The study highlights that policy should be designed to prevent fluctuations in sustainable EP and plan conservative energy policies that motivate discovering alternative energy sources to meet increasing energy demand and improve economic growth.

Keywords

• energy price
• GDP
• real effective exchange rate
• money supply
• inflation rate