Dynamics of energy use, technological innovation, economic growth and trade openness in Malaysia

This study extends the Marshallian demand framework to investigate the effects of TI (technological innovation) on energy use in Malaysia. This extended theoretical frameworks predicts that TI, an exogenous element in the energy demand function, increases energy efficiency and, correspondingly, reduces energy consumption at a given level of economic output. Using an ARDL (autoregressive distributed lag) bounds testing approach for the sample period 1985-2012, this study confirms both short- and log-run theoretical predictions. However, controlling for the effect of TI, this study finds that increasing GDP per capita and trade openness produce a rebound effect of TI on energy use.