Measuring the Impact of Water Resources on Specific Growth Factors in Pakistan

Abstract

Water is one of the most important natural resources that necessary for sustainable socio- economic development of any economy. It is link and having a relationship with each sector of the society including social, economic and environment. The objective of the study is to examine the long-run relationship between water resources and specific growth factors (energy consumption, water availability in agriculture, agriculture value added, urbanization, population and trade openness) in Pakistan using Johansen cointegration technique. Data set from 1975-2009 are taken for time series analysis. The result reveals that there is long-run relationship between all given variables i.e., water resources, energy consumption, water availability in agriculture, agriculture value added, urbanization, population and trade openness. Energy consumption and agriculture value added are positive related to water availability (environmental factor) both in the short and long-run. Increase in urbanization is the major contributor to environmental damages (water availability). Population has a significant impact on water availability in the short-run; however, it is insignificant in the long-run. Trade openness has a negative impact on water recourses in the long-run. The results of impulse response analysis indicate that one standard error shock to water has a negative impact on energy consumption, urbanization and population, while a positive impact on agriculture value added and trade openness over a 10 year period. Similarly, a high proportion of water shock is explained by their own innovations compared to the innovations for energy consumption, agriculture value added, urbanization, population and trade openness variables.