Effect of Domestic Consumption on GDP of Pakistan from 1981-2014

Abstract

The purpose of the study was to study the impact of domesticconsumption (electricity consumption, food, and natural gas) on the EconomicGrowth of Pakistan. Time series data is used for analysis from 1981 to 2014taken from the World Governance Indicators Index. Pakistan's GDP is used as adependent variable and household consumption includes consumption ofelectricity, food, and natural gas used as independent variables. Multipleregression analysis is used to determine the relationship between differentvariables. The OLS method is used in study analysis. After checkingstationarity and applying the OLS technique, we found that there is a negativecorrelation between electricity consumption and economic growth. The results of the study revealed that the differentconsumption patterns of consumers negatively impact the economic growth of thecountry so the study suggests that there should be power-saving techniques thatonly can improve the natural resources and conserve resources. The study alsofound that the impact of independent variable has a positive impact on economicgrowth and insignificant results of food consumption show that households mayspend less on food consumption when their disposable income is less and theyincrease their consumption whenever income increases which affect the economymostly. As collected data shows that the consumption patterns change every yearand upsurge, so the economic production grows and impacts positively. The thirdindependent variable is natural gas consumption that is also shown a positiveand significant impact on the economy of Pakistan.