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Electricity consumption and economic growth: evidence from Pakistan

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  • Javid, Attiya Yasmin
  • Muhammad, Javid
  • Awan, Zahid Ashraf

Abstract

The prime objective of this study is to examine the long run relationship between real GDP per capita and electricity consumption for Pakistan over the period 1971 to 2008. The results reveal that there is unidirectional causality from electricity consumption to real GDP per capita. The findings of the study also show that there is a long run relationship between real GDP per capita and electricity consumption. The unidirectional causality running from electricity consumption to economic growth indicates that electricity is a limiting factor to economic growth and hence shocks to electricity supply will have a negative impact on economic growth. The implication emerging from this study is that for an electricity-deficient country like Pakistan, where the electricity sector operates at bare capacity margin, there is a need for planning and investment in infrastructure development to fulfill increased electricity demand.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48011.

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Date of creation: 19 Apr 2012
Date of revision: 01 Oct 2012
Publication status: Published in Economics and Business Letters Economics Journal 1.2(2013): pp. 21-32
Handle: RePEc:pra:mprapa:48011

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Keywords: electricity consumption; economic growth; causal relationship; cointegration;

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  1. Ozturk, Ilhan & Acaravci, Ali, 2010. "CO2 emissions, energy consumption and economic growth in Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(9), pages 3220-3225, December.
  2. Ferguson, Ross & Wilkinson, William & Hill, Robert, 2000. "Electricity use and economic development," Energy Policy, Elsevier, vol. 28(13), pages 923-934, November.
  3. Narayan, Paresh Kumar & Smyth, Russell, 2005. "Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests," Energy Policy, Elsevier, vol. 33(9), pages 1109-1116, June.
  4. Rehana Siddiqui, 2004. "Energy and Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(2), pages 175-200.
  5. Morimoto, Risako & Hope, Chris, 2004. "The impact of electricity supply on economic growth in Sri Lanka," Energy Economics, Elsevier, vol. 26(1), pages 77-85, January.
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  7. Shiu, Alice & Lam, Pun-Lee, 2004. "Electricity consumption and economic growth in China," Energy Policy, Elsevier, vol. 32(1), pages 47-54, January.
  8. Wolde-Rufael, Yemane, 2004. "Disaggregated industrial energy consumption and GDP: the case of Shanghai, 1952-1999," Energy Economics, Elsevier, vol. 26(1), pages 69-75, January.
  9. Jumbe, Charles B. L., 2004. "Cointegration and causality between electricity consumption and GDP: empirical evidence from Malawi," Energy Economics, Elsevier, vol. 26(1), pages 61-68, January.
  10. Narayan, Paresh Kumar & Smyth, Russell, 2008. "Energy consumption and real GDP in G7 countries: New evidence from panel cointegration with structural breaks," Energy Economics, Elsevier, vol. 30(5), pages 2331-2341, September.
  11. Muhammad Arshad Khan & Abdul Qayyum, 2009. "The demand for electricity in Pakistan," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 33(1), pages 70-96, 03.
  12. Ghosh, Sajal, 2002. "Electricity consumption and economic growth in India," Energy Policy, Elsevier, vol. 30(2), pages 125-129, January.
  13. Jamil, Faisal & Ahmad, Eatzaz, 2010. "The relationship between electricity consumption, electricity prices and GDP in Pakistan," Energy Policy, Elsevier, vol. 38(10), pages 6016-6025, October.
  14. Yoo, Seung-Hoon, 2005. "Electricity consumption and economic growth: evidence from Korea," Energy Policy, Elsevier, vol. 33(12), pages 1627-1632, August.
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Cited by:
  1. Shahateet, Mohammed, 2014. "Modeling Economic Growth and Energy Consumption in Arab Countries: Cointegration and Causality Analysis," MPRA Paper 57304, University Library of Munich, Germany.

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