The nexus of electricity and economic growth in major economies: The United States-India-China triangle

Abstract

A recently developed bootstrap autoregressive-distributed lag test with structural breaks has been used to test the cointegration and causality regarding major economies worldwide, in order to investigate the relationship between electricity and economic growth during the period 1971–2014. Although a long-run cointegrating relationship between the time series of real GDP and electricity consumption per capita cannot be sufficiently detected, the results of this research show the contingency of causality. In India, the past histories of electricity consumption serve as a predictive indicator influencing the present states of economic growth. Positive and negative feedback exists in the United States and China, respectively. The results of the growth hypothesis support the government in India budgeting an enormous amount of money for its infrastructural development in the fiscal year 2017–2018. The government in the United States continues to investigate modern methods of developing the supply of electricity, such as renewable energy technologies. After the economic growth in China, Chinese citizens live in better conditions and garner a higher level of culture. Thus, they may pursue lower-energy-consuming products to strive for a better environment. Based on empirical analysis, certain policy and managerial implications have been addressed by decision-makers at the macroeconomic and microeconomic levels.