Electricity Consumption and Economic Growth Nexus: Evidence from Maki Cointegration

Abstract

Access to electricity is seen as an essential driver for economic growth in both developing and developed economies. It is based on the above premise that this paper empirically revisits the dynamic relationship between electricity consumption, real gross domestic product per capita and carbon dioxide emissions for the case of Nigeria. To this end, this study leverages on annual data from 1971-2014 for the econometrics analysis. This study employs relatively new estimation techniques that accommodate for structural break(s). Stationarity properties of variables are investigated via Zivot-Andrews (1992) unit root stationarity test while, for long-run equilibrium relationship, Maki (2012) cointegration test is adopted, which accounts for multiple structural breaks. Subsequently, this study probes for direction of causation, through the Toda-Yamamoto (1995) approach. According to the Maki cointegration test, there exists a cointegration relationship between electricity consumption, economic growth and carbon dioxide emissions. Empirical findings validate the electricity-induced growth hypothesis for the study area. Further insights are elucidated in the discussion section of the study with possible action steps (implications). DOI: http://dx.doi.org/10.5755/j01.ee.30.1.20748