is important because changes in electricity use are
frequently countered by the substitution of other factors of production, resulting in an insignificant overall
impact on output. Weighting electricity use for changes
in the composition of electricity input is important
because a large part of the growth effects of electricity are due to substitution of higher quality electricity
sources such as electricity for lower quality electricity sources such as coal (;all et al. 1986; Kaufmann
1994; Jorgensen 1984). When both these innovations
are employed, electricity is found to Granger-cause
GDP. These results are supported by Hamilton (1983)
and Burbridge and Harrison (1984), who found that
changes in oil prices Granger-cause changes in GNP
and unemployment in VAR models whereas oil prices
are exogenous to the system.
Reynolds and Kolodzieji (2008) examined the relationship between oil, coal, and natural gas production
and GDP in the former Soviet Union. Using Grangercausality tests within a bivariate framework, they
found unidirectional causality from oil production
to GDP and unidirectional causality from GDP to
coal production and natural gas production, respectively. In an examination of the relationship between
electricity consumption and economic growth for 11
Commonwealth of Independent States (CIS) countries
using a panel error correction model, Apergis and
Payne (2009b) revealed unidirectional causality from
electricity consumption to economic growth in the
short-run and bidirectional causality in the long-run.
In a panel study of 15 transition economies (including
Belarus, Estonia, Latvia, Lithuania, Moldova, Russia, and the Ukraine), Acaravci and Ozturk (2010)
failed to find a cointegrating relationship between
electricity consumption per capita and real GDP per
capita. In a panel study of the relationship between
emissions, electricity consumption, and growth for
11 CIS countries, Smeich and Papeiz (2014) studied
electricity consumption and economic growth in the
light of meeting the targets of energy policy in the
EU using bootstrap panel Granger-causality approach;
their results show that the level of compliance with
energy policy targets influences linkages between
electricity consumption and economic growth. The
results indicate causal relations in the group countries
with the greatest reduction of greenhouse gases emissions, the highest reduction of energy intensity, and
highest share of electricity consumption in total energy
consumption. In the remaining groups it showed a
neutrality hypothesis.
It is vital that developing nations invest in electricity infrastructure during their economic growth
path. Policy makers devote a lot of effort to the
efficient use of electricity in the development process. Electricity supply capacity could be expanded
to meet consumption needs to be adequate during the
time of economic growth to stimulate the process of
all-inclusive growth. Paul and Bhattacharya (2004)
studied the causal relationship between energy consumption and economic growth in India using sample
data of 1950–1996 using standard Granger causality
test (1969) for a linear combination of non-stationary
variables remaining non-stationary. If a linear combination of non-stationary variables becomes stationary,
then the Error Correction Model (ECM) was adopted.
Results showed a bi-directional causal relationship
between energy consumption and economic growth.
The Johansen multivariate approach (1991) at lag
length 4 reveals long-run causality exists from energy
consumption to economic growth. The results of a
standard Granger causality test and the Engel-Granger
approach show only unidirectional causality between
energy consumption and economic growth. Earlier
in an analysis of the relationship between economic
growth and energy consumption, Pachuri (1977) and
Tyner (1978), using regression approach, found a
strong relation between energy consumption and economic growth in India. Cheng (1999) in his quest
for causality established a unidirectional causal relation from economic growth to energy consumption.
In contrast, Asafu-Adjaye (2000) estimated a unidirectional Granger causality from energy consumption
to income. The findings of Asafu-Adjaye (2000) do
not support the findings of Cheng (1999). Empirical results identify a bi-directional causality between
energy consumption and economic growth. This study,
therefore, is situated in a hotly contested and controversial area; the controversy of the debate revolves around
different countries, different data sets, different time
periods, and different methods, all of which leave no
room for a common position of agreement. It is amidst
this controversy that we intend to make a contribution.
Omay et al. (2010) investigated the relationship
between energy consumption and economic growth
using evidence from nonlinear panel cointegration
and causality tests and compared both developing and
developed countries. It gave a unidirectional causality
that growth increases energy consumption in recess
and expansion periods, proposing a weak relationship in the short run. Output does not Granger-cause
growth in the short run. Odhiambo (2009) examined energy consumption and economic growth in
South Africa in a tri-variate causality test. His empirical results showed a bidirectional causality between
energy consumption and economic growth, both in
the short and long run. Odhiambo (2010) studied
energy consumption and economic growth in Democratic Republic of Congo (DRC): using autoregressive
distribution lag and Granger causality testing; his
findings confirm the existence of a long-run relationship between electricity consumption and economic
growth. Odhiambo (2010) investigated energy consumption and economic growth in Tanzania using
autoregressive distribution lag and Vector Error Correction Mechanism (VECM); his empirical results
showed causality between electricity consumption and
economic growth.
Tang et al. (2016) studied energy consumption and
economic growth in Vietnam using data from 1971–
2011 using a multivariate analysis and neoclassical
Solow growth model; his findings were a unidirectional relationship running from energy consumption
277
frequently countered by the substitution of other factors of production, resulting in an insignificant overall
impact on output. Weighting electricity use for changes
in the composition of electricity input is important
because a large part of the growth effects of electricity are due to substitution of higher quality electricity
sources such as electricity for lower quality electricity sources such as coal (;all et al. 1986; Kaufmann
1994; Jorgensen 1984). When both these innovations
are employed, electricity is found to Granger-cause
GDP. These results are supported by Hamilton (1983)
and Burbridge and Harrison (1984), who found that
changes in oil prices Granger-cause changes in GNP
and unemployment in VAR models whereas oil prices
are exogenous to the system.
Reynolds and Kolodzieji (2008) examined the relationship between oil, coal, and natural gas production
and GDP in the former Soviet Union. Using Grangercausality tests within a bivariate framework, they
found unidirectional causality from oil production
to GDP and unidirectional causality from GDP to
coal production and natural gas production, respectively. In an examination of the relationship between
electricity consumption and economic growth for 11
Commonwealth of Independent States (CIS) countries
using a panel error correction model, Apergis and
Payne (2009b) revealed unidirectional causality from
electricity consumption to economic growth in the
short-run and bidirectional causality in the long-run.
In a panel study of 15 transition economies (including
Belarus, Estonia, Latvia, Lithuania, Moldova, Russia, and the Ukraine), Acaravci and Ozturk (2010)
failed to find a cointegrating relationship between
electricity consumption per capita and real GDP per
capita. In a panel study of the relationship between
emissions, electricity consumption, and growth for
11 CIS countries, Smeich and Papeiz (2014) studied
electricity consumption and economic growth in the
light of meeting the targets of energy policy in the
EU using bootstrap panel Granger-causality approach;
their results show that the level of compliance with
energy policy targets influences linkages between
electricity consumption and economic growth. The
results indicate causal relations in the group countries
with the greatest reduction of greenhouse gases emissions, the highest reduction of energy intensity, and
highest share of electricity consumption in total energy
consumption. In the remaining groups it showed a
neutrality hypothesis.
It is vital that developing nations invest in electricity infrastructure during their economic growth
path. Policy makers devote a lot of effort to the
efficient use of electricity in the development process. Electricity supply capacity could be expanded
to meet consumption needs to be adequate during the
time of economic growth to stimulate the process of
all-inclusive growth. Paul and Bhattacharya (2004)
studied the causal relationship between energy consumption and economic growth in India using sample
data of 1950–1996 using standard Granger causality
test (1969) for a linear combination of non-stationary
variables remaining non-stationary. If a linear combination of non-stationary variables becomes stationary,
then the Error Correction Model (ECM) was adopted.
Results showed a bi-directional causal relationship
between energy consumption and economic growth.
The Johansen multivariate approach (1991) at lag
length 4 reveals long-run causality exists from energy
consumption to economic growth. The results of a
standard Granger causality test and the Engel-Granger
approach show only unidirectional causality between
energy consumption and economic growth. Earlier
in an analysis of the relationship between economic
growth and energy consumption, Pachuri (1977) and
Tyner (1978), using regression approach, found a
strong relation between energy consumption and economic growth in India. Cheng (1999) in his quest
for causality established a unidirectional causal relation from economic growth to energy consumption.
In contrast, Asafu-Adjaye (2000) estimated a unidirectional Granger causality from energy consumption
to income. The findings of Asafu-Adjaye (2000) do
not support the findings of Cheng (1999). Empirical results identify a bi-directional causality between
energy consumption and economic growth. This study,
therefore, is situated in a hotly contested and controversial area; the controversy of the debate revolves around
different countries, different data sets, different time
periods, and different methods, all of which leave no
room for a common position of agreement. It is amidst
this controversy that we intend to make a contribution.
Omay et al. (2010) investigated the relationship
between energy consumption and economic growth
using evidence from nonlinear panel cointegration
and causality tests and compared both developing and
developed countries. It gave a unidirectional causality
that growth increases energy consumption in recess
and expansion periods, proposing a weak relationship in the short run. Output does not Granger-cause
growth in the short run. Odhiambo (2009) examined energy consumption and economic growth in
South Africa in a tri-variate causality test. His empirical results showed a bidirectional causality between
energy consumption and economic growth, both in
the short and long run. Odhiambo (2010) studied
energy consumption and economic growth in Democratic Republic of Congo (DRC): using autoregressive
distribution lag and Granger causality testing; his
findings confirm the existence of a long-run relationship between electricity consumption and economic
growth. Odhiambo (2010) investigated energy consumption and economic growth in Tanzania using
autoregressive distribution lag and Vector Error Correction Mechanism (VECM); his empirical results
showed causality between electricity consumption and
economic growth.
Tang et al. (2016) studied energy consumption and
economic growth in Vietnam using data from 1971–
2011 using a multivariate analysis and neoclassical
Solow growth model; his findings were a unidirectional relationship running from energy consumption
277