Is there a relationship between electricity consumption and economic growth in Zimbabwe?

Abstract

This paper investigated the causality relationship between electricity consumption and economic growth in Zimbabwe using a bi-variate time series framework for the period 1980 to 2011. The causality relationship between the two variables has been a subject of extensive debate for decades among economists and academics. There are four dominant perspectives with regard to the causality relationship between electricity consumption and economic growth. The first perspective maintains electricity consumption spur economic growth whilst the second perspective argues that it is economic growth that drives electricity consumption. The third perspective suggests that both electricity consumption and economic growth promotes each other whilst the fourth perspective argues that there is no causality relationship at all between the two variables both in the short and long run. Using the bi-variate causality test framework, this study failed to establish any direct causality relationship between energy consumption and economic growth. The results imply the existence of an indirect bi-directional causality relationship between the two variables. The study therefore recommends Zimbabwe authorities to address indirect factors that have a bearing on economic growth over and above scaling up investment efforts into electricity production capacity improvement infrastructure