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Modelling the role of energy price movements toward economic stability in Malaysia: new evidence from wavelet-based analysis

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Abstract

Energy is one of the prime factors in influencing the sustainable development of a country. Different energy sources play important roles in driving the income growth of different economic sectors such as industrial, agricultural, and services. Fossil fuels, however, have come under strong criticism for actively accelerating climate change. As such, it is imperative to investigate the contributions of various energy sources toward sustainable growth. With Malaysia as the test-bed, the present study analyzes the impact of energy prices on economic stability using the novel wavelet-based analysis. Specifically, the study analyzed the impact of crude oil, natural gas, and gasoline prices on the economic (brown) and green growth from 1995 to 2020. The results show that in continuous wavelet transform, the cone of influence of all five factors exhibits strong short-run variance and fluctuations from 2005 to 2013. However, the intensity of brown growth is more influential than green growth. Similarly, in wavelet coherence graphs, the downward right arrows indicate positively significant associations between crude oil prices, natural gas prices, and gasoline prices with brown and green growth. Additionally, wavelet-based Granger causality reveals a bidirectional causal relationship between all variables. The results thus strongly suggest that energy prices predominantly affect the economic (brown) and green growth progression of the Malaysian economy. The study concludes with some suggested implications to augment the country’s sustainable growth.

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The data that support the findings of this study are openly available on request.

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Funding

This paper was supported by the Fundamental Research Grant Scheme (FRGS) Project: FRGS/1/2020/SS01/SYUC/03/2, provided by the Ministry of Higher Education, Malaysia.

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Authors and Affiliations

  1. Sunway Business School, Sunway University, Subang Jaya, Malaysia

    Sahar Afshan, Calvin W. H. Cheong & Arshian Sharif

  2. University of Economics and Human Sciences, Warsaw, Poland

    Arshian Sharif

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  1. Sahar Afshan
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  2. Calvin W. H. Cheong
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Sahar Afshan: conceptualization, writing—original draft, data curation. Calvin W.H. Cheong: review and editing, writing—original draft. Arshian Sharif: writing—original draft, formal analysis.

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Correspondence to Arshian Sharif.

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Afshan, ., Cheong, C.W.H. & Sharif, A. Modelling the role of energy price movements toward economic stability in Malaysia: new evidence from wavelet-based analysis. Environ Sci Pollut Res 30, 88861–88875 (2023). https://doi.org/10.1007/s11356-023-28660-0

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