Oil Products Consumption and Economic Growth in Cameroon Households: An Assessment Using ARDL Cointegration and Granger Causality Analysis

Flavian Emmanuel Sapnken, Jean Gaston Tamba, Salome Essiane Ndjakomo, Francis Djanna Koffi

Abstract


This study identifies the factors accountable for the historical growth trends in kerosene and liquefied petroleum gas (LPG) consumption in Cameroon households, thereby quantifying their short- and long-run effects for the period 1994-2014. ARDL bound test and Granger-causality following Toda-Yamamoto procedure under an augmented VAR framework are estimated. Empirical results validate the presence of a long-run equilibrium relationship on one hand between kerosene consumption, prices, income, and urbanization; and on the other hand between LPG consumption, prices, income, and urbanization. Prices, income and urbanization have significant positive impact on kerosene and LPG consumption both in the short- and long-runs, with evidence of high degree of fuel substitution from kerosene to LPG. Granger causality test show that there exists bidirectional causality between LPG consumption and income at the 5% significance level, whereas there is no causality between kerosene consumption and income. This means that an increase in LPG consumption affects economic growth with feedback effect. Consequently, supporting energy policies aimed at increasing LPG consumption while reducing kerosene consumption is achievable in Cameroon. Other captious policy measures and sensitive issues such as market liberalization, energy accretion programs and market competitiveness to upgrade availability, accessibility, distribution and extension of energy services are discussed.

Keywords: oil products consumption; Elasticity; ARDL; Causality; Households; Cameroon

JEL Classifications: C22, C4, C5, R2

DOI: https://doi.org/10.32479/ijeep.9877


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