The asymmetric linkage between energy use and economic growth in selected African countries: Evidence from a nonlinear panel autoregressive distributed lag model

Abstract

This paper endeavors to shed light on the asymmetric heterogeneous relationship between energy use and economic growth in nineteen selected African countries from 1971 to 2014. We employ, to this end, a nonlinear panel autoregressive distributed lag model and an asymmetric panel causality test. The empirical results suggest that the relationship between energy use and economic growth is asymmetric and depends on the phases of economic cycle. Firstly, in periods of economic expansion, positive shocks on energy use have a positive and significant effect on economic growth in the long-run but have a weak positive effect in the short-run. Negative shocks on energy use have a negative and significant effect on economic growth in the long-run but a positive and significant effect in the short-run. Moreover, in periods of economic expansion, economic growth tends to react more to a decrease in energy use than to an increase in energy use. Secondly, in period of economic contraction, positive shocks on energy use accentuate the negative variation of economic growth in the long-run while in the short-run, economic contraction is resorb by negative shocks on energy use. Thirdly, net energy-importing economies located in North Africa, East Africa, Central Africa and Southern Africa are the most subject to energy asymmetric shocks. For net energy-exporting countries, the asymmetric relationship between energy use and economic growth is mixed. We also find that negative changes in economic activity lead to negative variations of energy use. Fourthly, positive and negative shocks on the cyclical components of energy use and economic growth do not have, over the time, the same correlation with positive and negative shocks of one or other of the variables. From the research that has been carried out, it appears that sound economic policy decisions require information on the asymmetric linkage between energy use and economic growth.