Hossain and Saeki investigated the causal relationship between electricity consumption and economic growth for a panel of six South Asian countries using cointegration and error correction mechanism. They found that causality runs from electricity consumption to economic growth in Bangladesh, from economic growth to electricity consumption in India, Nepal and Pakistan and no causal relationship is found between electricity consumption and economic growth in Iran and Sri-Lanka.
Thus the existing literature reveals that due to the application of different econometric methodologies and different sample sizes the empirical results are very mixed and even vary for the same panel and are not conclusive to present policy formulation that can be applied over the countries especially for lower middle income and low income countries. Thus this study tries to overcome the shortcoming literature related with the linkage between electricity consumption and economic growth. Also this empirical study will be important for policy recommendation from the point of view of electricity consumption and economic growth for high income, upper middle income, lower middle income and low income panels and also for global panel. Annual data for electricity consumption (EC) (kWh per capita), and per capita GDP (PGDP) (constant 2000 US $), are downloaded from the World Bank’s Development Indicators. The data is for the period from 1960 to 2008. there
High income panel of 30 countries, upper middle income panel of 20 countries, lower middle income panel of 20 countries and low income panel of 6 countries are considered for this study. Finally a global panel of 76 countries is considered for this study. At first we reported different descriptive statistics of the variables in order to compare the variability among different panels in Table 1. In respect of economic growth it is found that high income countries are more volatile than low income countries. The volatility of global panel is highest which indicates the existence of huge differential among the countries in the world. In respect of per capita GDP the range is highest for high income panel and lowest for low income panel. The range of per capita GDP for global panel is 56552.4051 USD which indicates the significant differential between high income and low income countries in the world.
The mean electricity consumption recorded is highest for high income panel followed by upper middle income, lower middle income and low income panel indicates that high income countries are consuming more electricity than low income countries. The mean electricity consumption for global panel is 2795.645 kWh, which is lower than high income panel and higher than upper middle income, lower middle income and low income panels. In respect of electricity consumption the low income countries are more volatile than high income countries indicates that at the early stage of economic development the energy consumption will not be consistent. The volatility for global panel in respect of electricity consumption is 153.54% which indicates the existence of huge differentials in respect of per capita electricity consumption of high income and low income countries in the world. Since the average electricity consumption of high income countries is relatively higher thus a general question arises in our mind whether electricity consumption causes the economic growth. Thus to give the answer of the question, the principal purpose of this study is made to investigate empirically the dynamic causality relationships between electricity consumption and economic growth for five panels based on the modern econometric techniques.
Table-1 Descriptive Statistics for the Individual and also for Panel
|Different Panels||Per Capita GDP ( constant 2000 USD)|
|Upper Middle Income||72.325||9893.811||3024.657||1819.418||60.153||980|
|Lower Middle Income||180.861||2672.456||827.271||456.979||55.239||980|
|Electricity Consumption (kWh Per Capita)|
|Upper Middle Income||89.824||4938.405||1096.446||901.364||82.208||980|
|Lowe Middle Income||15.755||1521.236||317.358||271.039||85.405||980|