Electricity Consumption and Economic Growth in Bangladesh: Co-integration and Causality Analysis
This paper tries to investigate the relationship between economic growth, electricity consumption and investment for Bangladesh through co-integration and causality analysis over the period 1981 to 2011. Using ADP and PP unit root tests it is found that all the three variables are integrated of order 1. The Johansen co-integration tests indicate that all the variables are co-integrated with one co-integrating vector. The Granger F test results show the existence of unidirectional causality running from electricity consumption to economic growth, electricity consumption to investment and investment to economic growth without feedback in the short run. The source of causation in the long run is also found to be the error correction terms from electricity consumption and economic growth to investment. The long run elasticity of economic growth with respect to electricity consumption and investment are higher than their short run elasticity. This implies that over time higher electricity consumption and investment in Bangladesh give rise to more economic growth.
