Electric power consumption, foreign direct investment and economic growth

Abstract

Purpose – The purpose of this paper is to find potential causality and comparative relationships between electric power consumption, foreign direct investment and economic growth for India and Pakistan.Design/methodology/approach – Granger causality tests have been employed for estimating the short and long run relationships between the variables, along with the adoption of co‐integration and error correction mechanism.Findings – Empirical evidence for India covering a period of 1975‐2008 indicates long run causalities for electric power consumption and foreign direct investment boosting economic growth, electric power consumption and economic growth impacting foreign direct investment. For Pakistan, causality was established for foreign direct investment and economic growth inducing electric power consumption in the long run.Practical implications – For India, there is a strong need of policy that would guarantee secure and continued supply of electricity, as enhanced electric consumption is expected to ...