Abstract

This study aims to explore the relationship between economic growth, urbanisation, financial development and electricity consumption in United Arab Emirates for the period 1975–2011. The ARDL bounds testing approach is employed to examine the long-run relationship between the variables in the presence of structural breaks. The VECM Granger causality is applied to investigate the direction of causal relationships between the variables. Our empirical exercise validated the cointegration between the series in the case of United Arab Emirates. Further, results reveal that an inverted U-shaped relationship is found between economic growth and electricity consumption. Financial development adds in electricity consumption. The relationship between urbanisation and electricity consumption is also an inverted U-shaped. This implies that urbanisation increases electricity consumption initially and, after a threshold level of urbanisation, electricity demand falls. The causality analysis finds feedback hypothesis between economic growth and electricity consumption, i.e. economic growth and electricity consumption are interdependent. The bidirectional causality is found between financial development and electricity consumption. Economic growth and urbanisation Granger cause each other. The feedback hypothesis is also found between urbanisation and financial development, financial development and economic growth, and the same is true for electricity consumption and urbanisation.

Highlights

  • The objective of the current study is to assess the relationship among economic growth, financial development, urbanisation and electricity consumption in the United Arabs Emirates (UAE), applying the electricity demand function

  • The empirical evidence finds that the series of electricity consumption, economic growth, financial development and urbanisation are independently and identically distributed, as confirmed by Jarque-Bera statistics

  • This study has explored the relationship between economic growth, financial development, urbanisation and electricity consumption, applying an electricity demand model in the case of the United Arab Emirates

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Summary

Introduction

The objective of the current study is to assess the relationship among economic growth, financial development, urbanisation and electricity consumption in the United Arabs Emirates (UAE), applying the electricity demand function. The UAE holds the seventh-largest proved reserves of oil at 97.8 billion barrels. Added to its vast oil reserves, the UAE has 215 trillion cubic feet of proved natural gas reserves, a big part of its natural gas reserve is a sour gas, which requires filtering from sulphur. This has driven the UAE to become a net importer of natural gas to meet to local fast growing demand

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