A Causal Relationship between Energy Consumption, Energy Prices and Economic Growth in Africa

Authors

  • Farzana Sharmin United Nations Economic Commission for Africa
  • Mohammed Robayet Khan

Abstract

This paper examines the causal relationships between energy consumption, income and energy prices for the African countries using Johansen's maximum-likelihood test of cointegration and Error-Correction Model (ECM). To have a reliable estimate, only countries having data availability for a minimum period of 25 years were considered. This requirement reduces the sample size to 26 countries only. Out of these, a long run cointegrating relationship was found for a total of six countries, which was then subsequently analyzed to confer on the direction of causality. Out of the reported five countries, we found the existence of bidirectional Granger causality for Ethiopia, Morocco and Mozambique. The result for Angola suggests unidirectional Granger causality running from income to energy consumption while no Granger causality for the case of Tanzania. Findings suggest that countries regardless of their level of income and development should direct their energy conservation policies on the basis of the energy-output causality relation.

Keywords: energy; Johansen's maximum likelihood test of cointegration; Error Correction Model.

JEL Classifications: C22; Q43; Q48

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Author Biography

Farzana Sharmin, United Nations Economic Commission for Africa

Associate Economic Affairs Officer, Sub-regional Office for Eastern Africa,United Nations Economic Commission for Africa, Kigali,Rwanda.

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Published

2016-07-22

How to Cite

Sharmin, F., & Khan, M. R. (2016). A Causal Relationship between Energy Consumption, Energy Prices and Economic Growth in Africa. International Journal of Energy Economics and Policy, 6(3), 477–494. Retrieved from http://econjournals.com/index.php/ijeep/article/view/2419

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Articles