Another Look at the Nexus Among Energy Consumption, Natural Resources, and Gross Capital Formation: Evidence from Pakistan

Natural resources are a nation’s wealth, and the use of this wealth depends on the nation’s developmental objective. The goal of this work is to determine whether Pakistan’s natural resources provide a sufficiently wide range of opportunities to support a green, more resource-efficient economy. This study explores the importance of energy consumption and natural resources on economic growth in Pakistan for the period 1971–2015 by employing the auto-regressive distribution lag. Our main objective is to verify the long-run relationships of gross capital formation (GCF), natural resources, and economic growth. The research, by using Granger causality models, finds that bidirectional causality exists between GCF and natural resources and concludes that GCF and natural resources play a vital role in Pakistan’s economy. Our findings have important implications for policy.