Abstract
The aim of this study is to investigate the causal relationship between electricity consumption and real output at the macro level and the sectoral levels in three main economic sectors, namely the agricultural, industrial, and services sectors in Egypt during the period 1971–2013. I use Johansen cointegration approach, vector error correction model, and Toda and Yamamoto (J Econom 66:225–250, 1995) approach. Empirical findings reveal the existence of a cointegration relationship between the variables at the macro level and the sectoral levels. At the macro level, there is bidirectional causality between real output and electricity consumption. Whereas at the sectoral levels, there exists bidirectional causality between electricity consumption and real output in the services sector and unidirectional causality running from real output in the industrial sector to electricity consumption. However, there is no causal relationship between electricity consumption and real output in the agricultural sector. These results can help policymakers in setting the appropriate electricity conservation policies that enhance economic growth at the macro level and the sectoral levels to prevent any possible adverse effect that may harm economic and social development. Additionally, ensuring a higher level of electricity generation needed for achieving high and sustainable economic growth is vital, where higher electricity generation can be provided through investing in clean technologies and renewable energy resources, such as wind and solar energy.
Highlights
During the last decade, the importance of electricity has increased, as it has been undoubtedly an essential pillar for economic and social development, especially for developing countries
The results indicated that all the variables are integrated of order 1 and that they are non-stationary at levels using Phillips– Perron test and augmented Dickey–Fuller (ADF) test except for agriculture value added in case of using ADF test
This study explores the causal relationship between electricity consumption and real output at the macro level and the sectoral levels in three main economic sectors, namely the agricultural, industrial, and services sectors in Egypt during the period 1971–2013
Summary
The importance of electricity has increased, as it has been undoubtedly an essential pillar for economic and social development, especially for developing countries. Researchers are concerned with analyzing the importance of electricity through investigating the causal relationship between electricity consumption and economic growth to help policymakers in setting their policies concerning plans for energy conservation policies and for achieving development and economic growth. It can be noticed that electricity consumption per capita has increased from 201.2 kWh. Real GDP per capita (US dollar) Electricity consumption per capita (kWh) in 1971 to 375.15 kWh in 1980; after two decades, it became 961.9 kWh; it reached 1657.76 kWh after a decade in 2014 with an average annual growth rate of 3.96% from 2000 to 2014. By comparing the real economic growth rate in Egypt with the real economic growth rate in emerging-market and developing economies and advanced economies, it is found that the real economic growth rate in Egypt has exceeded that of emerging-market and developing economies and advanced economies during the period 1980 to 1987, with some fluctuations after 1987; but during the period 1997–2014, the real economic growth rate in Egypt (around 4.2%) was below the real economic growth rate in emerging market (around 5.6%) [34, 60]
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