TITLE:
Causality Nexus of Electricity Consumption and Economic Growth: An Empirical Evidence from Ghana
AUTHORS:
Bismark Ameyaw, Amos Oppong, Lucille Aba Abruquah, Eric Ashalley
KEYWORDS:
Electricity Consumption, Real GDP Per Capita, Granger Causality Test, Co-Integration, Ghana
JOURNAL NAME:
Open Journal of Business and Management,
Vol.5 No.1,
November
18,
2016
ABSTRACT: Electricity plays a crucial role in the economic development of most economies. The causality nexus between electricity consumption and economic growth is important in enacting energy consumption policy and environmental policy. Many researchers have studied the causality between energy consumption and economic growth yet no consensus has emerged. Irrespective of the numerous researches conducted between these two variables, less evidence has been recorded in Ghana. Studies establishing the direction of causality between economic growth and energy consumption have concluded mixed result posing stern threat to Ghana’s energy policy. It is therefore viable to investigate the direction of causality between electricity consumption and economic growth in Ghana. This study uses the Cobb-Douglas growth model covering time series data from 1970 to 2014. Vector Error Correction Model was also conducted in order to empirically ascertain the error correction adjustment. Granger Causality test was used to determine the direction of causality between electricity consumption and economic growth and the empirical findings obtained herein reveals that there exists a unidirectional causality running from GDP to electricity consumption. This line of causality obtained from the data supports Growth-Led-Energy Hypothesis. Therefore, it is evident that Ghana is a less energy-dependent economy.