Examining the linkages between electricity consumption and economic growth in African economies

Abstract

As global energy consumption continues to increase, an increasing attention is also being drawn to the need to embrace cleaner energy despite ensuring energy security and efficiency in production. This study examines the relationship between economic growth and electricity consumption in sub-Sahara African economies between 1971 and 2017. It employs the System Generalized Methods-of-Moments (System GMM) techniques so as to address the issues of endogeneity in the data generating process. We also examine whether the impact of electricity consumption differs by the level of energy intensity, by employing an advanced dynamic panel threshold regression model to ascertain the degree of threshold level of energy intensity and the potential of threshold asymmetric of energy consumption on economic growth. Our results show significant positive relationship between electricity consumption and growth, including a threshold level of energy intensity which stood at 0.48%. This suggests that energy consumption beyond 0.48% will reduce growth, while consumption below this level will stimulate growth.