Electricity Consumption and Economic Growth: Evidence from South Asian Countries

Sebastian Majewski,Urszula Mentel,Raufhon Salahodjaev,Marek Cierpiał-Wolan

doi:10.3390/en15041327

Abstract

The purpose of this study is to shed light on the nexus between electricity supply and economic growth in South Asian countries during 1990–2018. The study employs Pedroni’s panel cointegration test as well as Dumitrescu and Hurlin’s (DH) causality test for panel data. The empirical results confirm a long-term relationship between electricity supply and economic growth. We fail to reject the non-causal relationship between electricity supply and economic growth for the panel, thereby affirming the neutrality hypothesis. Single country causality analysis reveals the growth hypothesis in the case of Pakistan. These results have a number of policy implications. For example, governments can introduce measures to improve energy efficiency in Bangladesh, India and Sri Lanka without fear of harming economic growth. The results for Pakistan may also imply that fostering green energy generation would lead to a positive effect on economic growth via improved electricity production. The government may use various policy tools to stimulate adoption of renewable energy, such as fiscal incentives, low interest loans, or grants for rural populations to speed up the green energy transformation.

Highlights

Energy sufficiency is an important factor in the economic development of any country [1,2,3]
Since energy efficiency is crucial for economies in the development stage, there are numerous studies that investigate the relationship between energy supply and economic growth
This paper explores the causal link between electricity supply and economic growth in four South-Asian economies during 1990–2018, utilizing Pedroni’s panel cointegration test and Dumitrescu and Hurlin’s panel Granger causality test

Summary

Introduction

Energy sufficiency is an important factor in the economic development of any country [1,2,3]. While the growth– energy association has significant policy implications, related literature suggests that there are four types of causal relationship between energy and economic growth, namely the neutrality, conservation, growth, and feedback hypotheses [6,7,8,9,10,11]. Taking into account that natural resources are viewed as one of the engines of economic progress, the empirical literature on the link between various types of energy and economic growth has proliferated over the past decades These studies highlight gas, oil, coal, nuclear, and renewable energy as potential factors affecting economic growth in developed and developing countries [18]. Another strand in existing literature investigates the role that electricity consumption plays in economic growth [19].

Review of Related Literature

Methodology and Data

Conclusion

Conclusions