An investigation into the causality between electricity consumption and economic growth in Ghana

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JULY, 2016
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Abstract
Knowledge of the direction of the causality between electricity consumption and economic growth is of primary importance if appropriate energy policies and energy conservation measures are to be devised. This study investigates into the long-run relationship between electricity consumption and economic growth as well as the direction of causality between these two variables in Ghana from 1971 to 2013. The study employed the Autoregressive Distributed Lag Model (ARDL) to test for cointegration between the variables and the Granger Causality test was used to determine the direction of the causality between electricity consumption and economic growth. The results from the ARDL showed that there is long-run relationship between electricity consumption and economic growth. Whiles that of the Granger Causality test showed that there exists a unidirectional long-run Granger causality running from economic growth to electricity consumption. These empirical findings imply that electricity conservation policies through both rationalizing the electricity supply efficiency improvement to avoid the wastage of electricity and managing demand side to reduce the electricity consumption without affecting the end-user benefits could be initiated without adverse effect on economic growth. The findings on the long-run relationship indicate that a sufficiently large supply of electricity can ensure that a higher level of economic growth.
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A dissertation submitted to the Department of Economics, Kwame Nkrumah University of Science and Technology in partial fulfilment for the award of a Master of Science degree (MSc) in Economics.
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