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Production Function with Electricity Consumption and Policy Implications in Portugal

Listed author(s):
  • Shahbaz, Muhammad
  • BENKRAIEM, Ramzi
  • MILOUDI, Anthony
  • Lahiani, Amine

Using a sample of quarterly data, we investigate the effect of electricity consumption, capital formation and financial development on economic growth in Portugal. A positive (negative) shock of electricity consumption is estimated to have increased (decreased) economic growth. Economic growth is positively affected by positive shock stems in capital. A positive (negative) shock in financial development declines (increases) economic growth. These findings reveal that (a) Portugal is still an energy-dependent economy; (b) energy is one of the major inputs for economic growth and development; (c) a conservation energy policy should not be implemented because energy is an important driver of growth; (d) economic growth enhances capital formation and not the opposite. Hence, it appears more relevant to boost economic growth before enhancing capital formation; (e) financial development does not appear to be an important catalyst for economic growth. Findings also highlight (f) the relevance of the recent energy policy implemented in Portugal and (g) the need to limit energy imports by means of producing electricity through renewable energy to reduce the external debt level in Portugal, especially after the 2008 crisis.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 81203.

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Date of creation: 02 Sep 2017
Date of revision: 06 Sep 2017
Handle: RePEc:pra:mprapa:81203
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