Electricity consumption–economic growth nexus in Uganda

ABSTRACT

This paper empirically examines electricity consumption–economic growth nexus in Uganda from 1981 to 2013. Autoregressive distributed lag-bounds testing and Granger causality tests are employed for analysis. The results confirm the existence of long-run relationship between electricity consumption and economic growth and vice versa. In addition, the Granger causality test results confirm conservation hypothesis in the short run and feedback hypothesis in the long run. Therefore, the paper recommends Ugandan authorities not only to develop energy policies geared toward promoting efficient energy use but also to expand electricity infrastructure to address increased electricity demand to support economic growth.

Keywords:

• ARDL bounds testing
• cointegration
• economic growth
• electricity consumption
• Granger causality

Acknowledgments

The authors wish to express their heartfelt appreciation to Dr. Sephooko Motelle and Mr. Michael Wulfsohn for their useful comments.

Notes

¹ Currently, Uganda generates electricity from hydroelectric power stations located at Nalubaale and Kiira power stations (formally Owen Falls dam) and Bujagali along the River Nile. In addition, there are thermal plants, mini, and micro-hydro power stations (e.g., Nyagak in Nebbi, Mubuku in Kasese, and Hydromax in Hoima) scattered in the country which either contribute to the national power grid or directly serve specific communities or entities.

² The correlation between the two variables is about 0.9303.

³ The lower bound values assume that all variables in ARDL model are I(0) while the upper bound values assume that the variables are I(1).

⁴ The null hypothesis of unit root was not rejected in levels for the two variables.

⁵ These results are consistent with those obtained by Aslan (2014) and Obhiambo (2009b), among other studies.

⁶ This implies that a high level of economic growth leads to high level of electricity demand and vice versa.