A panel cointegration study of foreign trade and energy: evidence from ECO countries

The increasing importance of energy resources in the growth of economic activity and the need to take advantage of this valuable resource, highlights identification and study factors that influence energy consumption. In this paper, the effect of foreign trade on energy consumption has been studied for 9 members of ECO during the period 1994-2011. In order to estimate the specified model, panel cointegration techniques with the dynamic ordinary least squares (DOLS) approach is used. The estimation results suggest that the variables of foreign trade (exports and imports), income and population have positive and significant impact on energy consumption, while the impact of oil prices and advances in technology is negative. Also, to further clarify the details of the results, in addition to a general review of foreign trade (exports and imports), two separate models are estimated for exports and imports. The results indicate a significant and positive impact of exports and imports on energy consumption separately. Wherease, the impact of exports is more than imports.