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Energy Consumption, Energy Prices and Economic Growth: Causal Relationships Based on Error Correction Model

Author

Listed:
  • Augustine C. Osigwe

    (Nigerian Institute of Social and Economic Research, Nigeria.)

  • Damilola Felix Arawomo

    (Nigerian Institute of Social and Economic Research, Nigeria.)

Abstract

This study examined the Granger causality of energy consumption, oil price and economic growth in Nigeria. Two sub-categories of energy (kerosene and electricity) were equally considered. The error correction model framework was used to test the granger causality of the variables. The results for the total energy showed bidirectional causality between energy consumption and economic growth. As regards electricity, bidirectional causality was found between electricity consumption and economic growth as well as between electricity consumption and electricity price. No causal relationship exists among kerosene consumption, kerosene price and economic growth. Based on our findings, we recommend that policies that promote energy consumption and economic growth be introduced. One way of achieving this is through the adoption of appropriate energy pricing framework that takes cognisance of both the present and the future generation.

Suggested Citation

  • Augustine C. Osigwe & Damilola Felix Arawomo, 2015. "Energy Consumption, Energy Prices and Economic Growth: Causal Relationships Based on Error Correction Model," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 408-414.
    • Handle: RePEc:eco:journ2:2015-02-03
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    Cited by:

    1. Desire SEKANABO & Elias Nyandwi & Hakizimana Khan Jean de Dieu & Valerie M. Thomas, 2022. "The Relationship between GDP and Biomass Energy Per Capita in Sub-Saharan Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 528-541, July.
    2. Paramati, Sudharshan Reddy & Bhattacharya, Mita & Ozturk, Ilhan & Zakari, Abdulrasheed, 2018. "Determinants of energy demand in African frontier market economies: An empirical investigation," Energy, Elsevier, vol. 148(C), pages 123-133.
    3. Abdulrahman M. Alsobhi, 2023. "Using Artificial Neural Networks to Recognize the Determinants of Energy Consumption in Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 489-493, May.
    4. Dagoumas, Athanasios S. & Polemis, Michael L. & Soursou, Symeoni-Eleni, 2020. "Revisiting the impact of energy prices on economic growth: Lessons learned from the European Union," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 85-95.
    5. Edwin Chukwuemeka Idoko & Chukwunonso Oraedu & Christian Chidera Ugwuanyi & Stephen Ikechukwu Ukenna, 2021. "Determinants of Smart Meter on Sustainable Energy Consumption Behavior: A Developing Country Perspective," SAGE Open, , vol. 11(3), pages 21582440211, July.
    6. Tanattrin Bunnag, 2022. "Causality Relationship between Electric Power Consumption and Economic Growth in Malaysia and Thailand: Autoregressive Distributed Lag Bound Testing Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 17-22.
    7. László Török, 2023. "Effects of Energy Economic Variables on the Economic Growth of the European Union (2010–2019)," Energies, MDPI, vol. 16(16), pages 1-17, August.
    8. Jain, Varinder, 2016. "Asian Giants' Fossil Fuel Dependence and the Challenge of Low Carbon Growth: Contrasting Performance of Clean Energy Development, Trade and Investment," MPRA Paper 75121, University Library of Munich, Germany.
    9. Chung-Siong Tang & Mori Kogid & James Alin & Brian Dollery, 2022. "Modelling Sectoral Energy Consumption in Malaysia: Assessing the Asymmetric Effects," Sustainability, MDPI, vol. 14(3), pages 1-17, February.
    10. Jannatul Ferdaus & Bismark Kusi Appiah & Shapan Chandra Majumder & Anouba Acha Arnaud Martial, 2020. "A Panel Dynamic Analysis on Energy Consumption, Energy Prices and Economic Growth in Next 11 Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 87-99.
    11. Saakshi CHAUHAN & Rajnish PANDE & Subrat SHARMA, 2020. "The causal relationship between Indian energy consumption and the GDP: A shift from conservation to feedback hypothesis post economic liberalisation," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(624), A), pages 203-212, Autumn.
    12. Jianhui Jian & Xiaojie Fan & Pinglin He & Hao Xiong & Huayu Shen, 2019. "The Effects of Energy Consumption, Economic Growth and Financial Development on CO 2 Emissions in China: A VECM Approach," Sustainability, MDPI, vol. 11(18), pages 1-16, September.
    13. Juan Marroquín Arreola & Humberto Ríos Bolívar, 2017. "Crecimiento económico, precios y consumo de energía en México. (Economic growth, price and power consumption in Mexico)," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 59-78, May.
    14. Tri Wahyu Adi & Eri Prabowo & Oetami Prasadjaningsih, 2022. "Influence of Electricity Consumption of Industrial and Business, Electricity Price, Inflation and Interest Rate on GDP and Investments in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 331-340, May.
    15. Patricia Iyore Ajayi & Adedayo Emmanuel Longe & Oladayo Ayokunle Omitogun & Shehu Muhammad, 2019. "Oil Price Shocks and Energy Consumption in Nigeria," Business & Management Compass, University of Economics Varna, issue 4, pages 275-293.
    16. Alexis Vessat, 2016. "Energy Consumption-Economic Growth nexus in Sub-Saharan Countries: what can we learn from a meta-analysis? (1996-2016)," Post-Print hal-01944514, HAL.

    More about this item

    Keywords

    Consumption; Economic Growth; Kerosene Consumption; Electricity Consumption;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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