TITLE:
Modeling Electricity Demand in the Ecowas Region: New Insights Using Fixed Effect with Driscoll and Kraay Standard Errors
AUTHORS:
Morlai Bangura, Olufemi Saibu
KEYWORDS:
Energy, Electricity Demand, Panel Data, Ecowas
JOURNAL NAME:
Modern Economy,
Vol.15 No.1,
January
26,
2024
ABSTRACT: Despite the implementation of
various initiatives and reforms aimed at enhancing electricity generation in
the West African sub-region, the provision of reliable and consistent
electricity supply remains a challenge. Consequently, the objective of this
study is to examine the factors that influence the demand for electricity
within the Economic Community of West African States (ECOWAS). To achieve this
objective, this study utilised a balanced panel dataset comprising eleven (11) countries spanning the
period from 1980 to 2019. Specifically, three commonly employed static models were utilised, namely pooled
ordinary least squares, fixed effect, and random effect models. The model
selection criteria confirmed the superiority of the fixed effect model. There were
signs of serial correlation, heteroscedasticity, and cross-sectional dependency
in the fixed effect model when it was carefully tested for its robustness. To
address these concerns, the fixed effect regression with Driscoll and Kraay
standard errors technique was utilised. The findings from the study suggest
that economic growth, foreign direct investment, and industrial expansion exert
a significant and positive influence on the demand for electricity in the
ECOWAS region. The study further revealed that there is no statistically
significant impact of population growth and trade openness on electricity demand.
Therefore, it is recommended that the governments within the ECOWAS region intensify
their efforts in implementing reforms aimed at enhancing the capacity and efficacy of electricity generation. Such
endeavours will contribute to the region’s capacity for long-term economic growth. Furthermore, it is
imperative to implement policies that are specifically designed to establish a favourable environment for
attracting foreign direct investment and promoting industrialization.