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Electricity consumption, economic growth, urbanisation and trade nexus: empirical evidence from Iceland

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  • Faisal Faisal
  • Turgut Tursoy
  • Nil Gunsel Resatoglu
  • Niyazi Berk

Abstract

This study empirically investigates the relationship between economic growth, electricity consumption, trade and urbanisation in Iceland, covering the period 1965–2013. The A.R.D.L. bounds testing approach to co-integration is applied to investigate the existence of the long-run relationship. The causality was investigated among the variables using Granger causality under the V.E.C.M. framework. The A.R.D.L. bounds testing approach to co-integration confirms a long-run relationship between electricity consumption and its regressors. The empirical estimation indicates the existence of a positive and statistically significant impact of economic growth, trade and urbanisation on electricity consumption for Iceland, not only in the long-run, but also in the short-run. Furthermore, electricity consumption converges to its long-run position by 45.63% speed of adjustment using the channels of urbanisation, trade and economic growth. The results of Granger causality imply the presence of a feedback causal relationship between urbanisation and electricity consumption in the long-run, thus validating the feedback hypothesis. However, economic growth is causing trade, thus validating the growth-led trade hypothesis in the short-run. Additionally, no causal relationship was found between electricity usage and economic growth, which confirms the neutrality hypothesis. Implementing the energy conservation policy will have no damaging effect on economic growth for Iceland.

Suggested Citation

  • Faisal Faisal & Turgut Tursoy & Nil Gunsel Resatoglu & Niyazi Berk, 2018. "Electricity consumption, economic growth, urbanisation and trade nexus: empirical evidence from Iceland," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 31(1), pages 664-680, January.
    • Handle: RePEc:taf:reroxx:v:31:y:2018:i:1:p:664-680
    DOI: 10.1080/1331677X.2018.1438907
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    Cited by:

    1. Saransh Royal & Namarta Kaushik & Ramesh Chander & Nirmala Chaudhary, 2023. "A Nexus between Sustainability, Openness, Development, and Urbanization: Panel Data Evidence from QUAD Nations," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 178-196.
    2. Kilinc-Ata, Nurcan & Proskuryakova, Liliana N., 2023. "Empirical analysis of the Russian power industry's transition to sustainability," Utilities Policy, Elsevier, vol. 82(C).

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