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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.

Suggested Citation

  • Javid, Attiya Yasmin & Muhammad, Javid & Awan, Zahid Ashraf, 2012. "Electricity consumption and economic growth: evidence from Pakistan," MPRA Paper 48011, University Library of Munich, Germany, revised 01 Oct 2012.
    • Handle: RePEc:pra:mprapa:48011
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    4. Adnan Rashid, 2015. "Contribution of Financial Development in Electricity-Growth Nexus in Pakistan," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(2), pages 224-241, April.
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    7. Ioana Anda Milin & Mariana Claudia Mungiu Pupazan & Abdul Rehman & Irina Elena Chirtoc & Nicolae Ecobici, 2022. "Examining the Relationship between Rural and Urban Populations’ Access to Electricity and Economic Growth: A New Evidence," Sustainability, MDPI, vol. 14(13), pages 1-16, July.
    8. OSHOTA, Sebil, 2019. "Modelling Asymmetric effects of Electricity Consumption and Economic Growth in Nigeria: Fresh evidence from Asymmetric ARDL and Granger Causality," MPRA Paper 98271, University Library of Munich, Germany, revised 22 Jan 2020.
    9. Bah, Muhammad Maladoh & Azam, Muhammad, 2017. "Investigating the relationship between electricity consumption and economic growth: Evidence from South Africa," Renewable and Sustainable Energy Reviews, Elsevier, vol. 80(C), pages 531-537.
    10. Shahateet, Mohammed Issa & Al-Majali, Khalid Ali & Al-Hahabashneh, Fedel, 2014. "Causality and Cointegration between Economic Growth and Energy Consumption: Econometric Evidence from Jordan," MPRA Paper 59067, University Library of Munich, Germany, revised Oct 2014.
    11. Khalid, Waqar & Özdeşer, Hüseyin & Jalil, Abdul, 2021. "An empirical analysis of inter-factor and inter-fuel substitution in the energy sector of Pakistan," Renewable Energy, Elsevier, vol. 177(C), pages 953-966.
    12. Furrukh Bashir, Ismat Nasim, Ammar Ismail, 2016. "Electricity Generation and Its Impact on Real GDP and Real Exports of Pakistan: A Co-integration Analysis," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 3(1), pages 52-67, March.
    13. Mohammed Issa Shahateet, 2014. "Modeling Economic Growth and Energy Consumption in Arab Countries: Cointegration and Causality Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 4(3), pages 349-359.
    14. Saba Anwar & Hafsa Hina & Fahad Sultan & Muhammad Ibrahim Khan & Muzaffar Abbas & Perfecto G. Aquino, 2020. "Investments in Energy Conservation: Policy Implications for Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 662-671.
    15. Li, Jianglong & Ho, Mun Sing & Xie, Chunping & Stern, Nicholas, 2022. "China's flexibility challenge in achieving carbon neutrality by 2060," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    16. Mbanda L. Njoke & Zhongqun Wu & Jean Gaston Tamba, 2019. "Empirical Analysis of Electricity Consumption, CO2 Emissions and Economic Growth: Evidence from Cameroon," International Journal of Energy Economics and Policy, Econjournals, vol. 9(5), pages 63-73.
    17. Karim Khan & Anwar Shah & Jaffar Khan, 2016. "Electricity Consumption Patterns: Comparative Evidence from Pakistan’s Public and Private Sectors," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 21(1), pages 99-122, Jan-June.
    18. Mudassir Zaman & Farzana Shaheen & Azad Haider & Sadia Qamar, 2015. "Examining Relationship between Electricity Consumption and its Major Determinants in Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 998-1009.
    19. Ahmed, Mumtaz & Azam, Muhammad, 2016. "Causal nexus between energy consumption and economic growth for high, middle and low income countries using frequency domain analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 60(C), pages 653-678.
    20. Sunde, Tafirenyika, 2017. "Energy Consumption and Economic Growth Modelling in SADC Countries: An Application of the VAR Granger Causality," MPRA Paper 86505, University Library of Munich, Germany, revised 24 Nov 2017.
    21. Harkat, Tahar, 2020. "Causality between Energy Consumption and Economic Development: Empirical Evidence from Morocco," MPRA Paper 98313, University Library of Munich, Germany.
    22. Ahmed, Mumtaz & Riaz, Khalid & Maqbool Khan, Atif & Bibi, Salma, 2015. "Energy consumption–economic growth nexus for Pakistan: Taming the untamed," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 890-896.
    23. Heffron, Raphael & Körner, Marc-Fabian & Wagner, Jonathan & Weibelzahl, Martin & Fridgen, Gilbert, 2020. "Industrial demand-side flexibility: A key element of a just energy transition and industrial development," Applied Energy, Elsevier, vol. 269(C).

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    More about this item

    Keywords

    electricity consumption; economic growth; causal relationship; cointegration;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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