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Energy consumption and economic growth: The experience of African countries revisited

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  • Wolde-Rufael, Yemane

Abstract

The aim of this paper is to re-examine the causal relationship between energy consumption and economic growth for seventeen African countries in a multivariate framework by including labor and capital as additional variables. We apply the variance decomposition analysis due to Pesaran and Shin [Pesaran M.H. and Shin, Y. Generalised impulse response analysis in linear multivariate models, Economics Letters, 1998; 58; 17–29.] to evaluate how important is the causal impact of energy consumption on economic growth relative to labor and capital. The results of our multivariate modified Granger causality analysis due to Toda and Yamamoto [Toda, H.Y. and Yamamoto, T. Statistical inference in vector autoregressions with possibly integrated process, Journal of Econometrics, 1995; 66; 225–250.] tend to reject the neutrality hypothesis for the energy–income relationship in fifteen out of the seventeen countries. In contrast, results of our variance decomposition analyses show that in eleven out of the seventeen countries, energy is no more than a contributing factor to output growth and not an important one when compared to capital and labor. Labor and capital are the most important factors in output growth in fifteen out of the seventeen countries. However, these results should be interpreted with care as they may not be sufficiently robust enough to support the inference that energy consumption plays a minor role in the economic growth of African countries.

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  • Wolde-Rufael, Yemane, 2009. "Energy consumption and economic growth: The experience of African countries revisited," Energy Economics, Elsevier, vol. 31(2), pages 217-224.
  • Handle: RePEc:eee:eneeco:v:31:y:2009:i:2:p:217-224
    DOI: 10.1016/j.eneco.2008.11.005
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    More about this item

    Keywords

    Energy consumption; Africa; Lag-augmented causality; Generalised variance decomposition;
    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

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