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Energy consumption and economic growth in Egypt: A disaggregated causality analysis with structural breaks

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  • Mesbah Fathy SHARAF

    (Department of Economics, University of Alberta, Edmonton, Canada)

Abstract

After the 2011 revolution, Egypt has experienced frequent electricity blackouts and a severe shortage of energy supplies. The government responded to the problem by reduc-ing the subsidy on energy for heavy industries, and household electricity use. Also, the government planned to introduce a smart card system that entails a certain quota of fuel for each registered car per month. It appeared to the public that the Egyptian government is attempting to adopt an energy conservation policy, to ration energy consumption and manage the deficit in energy supplies. Given that energy is an essential input for many economic activities, there is a concern that a reduction in energy consumption may damp-en the growth potentials of the Egyptian economy. This paper investigates the causal relationship between energy consumption and economic growth in Egypt during the peri-od 1980-2012, within a multivariate framework by including measures for capital and labor in the aggregate production function. Causality is tested using a modified version of the Granger causality test due to Toda and Yamamoto (1995). The analyses endogenously control for potential structural breaks in the time series when conducting the unit root tests. In addition to aggregate energy consumption, the analysis is also segregated by different components of energy use, including oil, electricity, natural gas, and coal to ac-count for any potential aggregation bias. Results show no causal relationship between total primary energy consumption and economic growth, supporting the neutrality hypothesis. When the analysis is stratified by energy type, a one-way positive causal relation running from economic growth to electricity and oil consumption is found which is consistent with the conservation hypothesis. The findings of this study provide empirical evidence that energy conservation policy has no negative effect on the growth prospects of the Egyptian economy in the long-run.

Suggested Citation

  • Mesbah Fathy SHARAF, 2017. "Energy consumption and economic growth in Egypt: A disaggregated causality analysis with structural breaks," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 46, pages 59-76.
    • Handle: RePEc:tou:journl:v:46:y:2017:p:59-76
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    References listed on IDEAS

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    Cited by:

    1. Piotr F. Borowski, 2021. "Significance and Directions of Energy Development in African Countries," Energies, MDPI, vol. 14(15), pages 1-19, July.
    2. Haider Mahmood & Tarek Tawfik Yousef Alkhateeb & Muhammad Tanveer & Doaa H. I. Mahmoud, 2021. "Testing the Energy-Environmental Kuznets Curve Hypothesis in the Renewable and Nonrenewable Energy Consumption Models in Egypt," IJERPH, MDPI, vol. 18(14), pages 1-17, July.
    3. Hlalefang Khobai & Nomahlubi Mavikela, 2018. "Investigating the Link between Foreign direct investment, Energy consumption and Economic growth in Argentina," Working Papers 1808, Department of Economics, Nelson Mandela University, revised Feb 2018.
    4. Tarek Tawfik Yousef Alkhateeb & Haider Mahmood, 2019. "Energy Consumption and Trade Openness Nexus in Egypt: Asymmetry Analysis," Energies, MDPI, vol. 12(10), pages 1-10, May.
    5. Sayed Sharaf & Wael Kortam, 2020. "Investigating Factors Affecting the Adoption of Renewable Energy within Businesses in the Egyptian Market: An Exploratory Research," World Journal of Business and Management, Macrothink Institute, vol. 6(1), pages 1-16, June.
    6. Hongyun, Han & Radwan, Amira, 2021. "Economic and social structure and electricity consumption in Egypt," Energy, Elsevier, vol. 231(C).

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    More about this item

    Keywords

    Energy Consumption ; Egypt;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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