Impact of Urbanization on Energy Consumption Intensity in Bangladesh: An Empirical Analysis

Farhan Khan, Sakib B. Amin and Saanjaana Rahman

Emerging countries undergo economic transformation through urbanization in which to continue modern economic activities, there exists high demand for different energy sources such as electricity, oil, coal, natural gas etc. To the best of our knowledge, no studies have been conducted to investigate the impact of urbanization on energy consumption intensity in Bangladesh and thus, the aim of this paper is to empirically analyze the effect of urbanization on energy consumption intensity with the help to time series data ranging from 1980-2015. Johansen’s cointegration test reveals that our variables are co integrated and through Granger Causality test we have found that there is a unidirectional causality running from urbanization to energy consumption intensity in the long run but in short run, Vector Error Correction Model (VECM) confirms no causality among the variables of interest. We employed CUSUM and CUSUMSQ tests to check the stability of the model and have found that the model is stable. Long run estimation results indicate that coefficient value of urbanization is positive and elastic as well. To carry on different economic activities in urban areas, proper policies should be taken to improve the energy sector in Bangladesh.