Does the electricity consumption and economic growth nexus alter during COVID-19 pandemic? Evidence from European countries

Abstract

This paper examines the impact of the COVID-19 pandemic on the electricity consumption and economic growth nexus using 30 European countries' quarterly data between 2015Q1 and 2021Q3. We employ the panel unit root, panel causality, and dynamic panel estimation tests and find that there is bi-directional causality between electricity consumption and economic growth. The findings of this study provide new insights into understanding the electricity consumption and economic growth nexus by suggesting that an increase in electricity consumption during the COVID-19 pandemic decreases economic growth. We also investigate the strict confinement period of the COVID-19 pandemic as a robustness test. The results of robustness analysis reveal that there is an even stronger negative impact of electricity consumption on economic growth due to the pandemic influenza mitigation strategies such as lockdowns and business’ shutdowns that cause people to intensely consume residential electricity.