Energy Access, Financial Development, and Economic Growth in Pakistan: Evidence from Nonlinear Autoregressive Distributed Lag (NARDL) Model with Asymmetric Analysis

Abstract

This study investigates the asymmetric effects of energy access — measured by electricity access rate and clean fuels and cooking technologies access — alongside financial development, trade openness, inflation, and urbanization on economic growth in Pakistan over the period 2000–2024. Employing the Nonlinear Autoregressive Distributed Lag (NARDL) framework developed by Shin, Yu, and Greenwood-Nimmo (2014), the study decomposes energy access shocks into positive and negative partial sums to capture asymmetric long-run and short-run dynamics. Empirical results reveal that positive shocks to clean energy access exert a statistically significant and sizable positive effect on GDP per capita (coefficient = 1.032, p < 0.01), whereas negative shocks reveal an asymmetric contractionary impact, confirming the presence of nonlinear adjustment. Trade openness also emerges as a significant positive driver of growth, while inflation imposes a significant negative drag. The bounds test confirms a robust long-run cointegrating relationship among variables. Diagnostic tests — including the Jarque-Bera normality test, Breusch-Pagan heteroscedasticity test, and CUSUM structural stability test — validate the reliability of the estimated model. Robustness is confirmed through dynamic multiplier analysis and rolling-window regressions. The findings carry critical policy implications: Pakistan must accelerate its clean energy transition, deepen financial markets, and pursue trade liberalization to sustain long-run growth momentum.

Keywords: NARDL; Energy Access; Economic Growth; Pakistan; Asymmetric Analysis; Clean Energy; Financial Development; Cointegration

JEL Classification: O13; Q43; F43; C22; G21; O53