The nexus of electricity consumption and economic growth in Gulf Cooperation Council economies: evidence from non-stationary panel data methods

ABSTRACT

This paper investigates the electricity-growth nexus of Gulf Cooperation Council (GCC) member countries from 1980 to 2014. To achieve the goal of this research, both panel cointegration and causality approaches are utilised to examine the long-term and causal relationships between variables. Empirical results confirm the presence of cointegration between variables. Moreover, this study finds that electricity consumption affects the long-term economic growth. Given that GCC member countries are energy-dependent economies, policies that aim to conserve energy consumption may jeopardise economic growth.

KEYWORDS:

• Electricity consumption
• economic growth
• Gulf Cooperation Council

Acknowledgements

We would like to thank the three anonymous reviewers for their constructive comments and suggestions to improve the earlier version of this manuscript. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. According to EIA, electricity demand is the rate at which energy is delivered to loads and scheduling points by generation, transmission, and distribution facilities. On the other hand, energy demand is the requirement for energy as an input to provide products and/or services. Therefore, electricity consumption was chosen, as it is considered to provide a better indication of energy sources used industrially and in households in GCC countries.

2. For robustness, the present study also applied the residuals-based test for panel cointegration introduced by Kao (1990). The results are consistent with the other two panel cointegration tests, indicating that the finding of this study is robust.

3. Many studies used the significance of ECT to measure long-term causality. However, in the case of more than two variables, such as in the present study, we cannot identify which variable causes economic growth under the Granger causality test. Therefore, long-term causality provided by the ECM-based Granger causality test is a collective causality and should be interpreted with caution.