Advertisement

Electricity consumption and economic growth nexus in China: an autoregressive distributed lag approach

  • Xiaojian Zhong
  • Hongyi Jiang
  • Chen Zhang
  • Rui ShiEmail author
Research Article
  • 30 Downloads

Abstract

This study attempts to investigate the relationship among electricity consumption, economic growth, and employment in China. Distinct from most of the previous studies, our empirical research identifies a long-run equilibrium cointegration relationship among the three covariates during the period of 1971–2009 with the recently developed autoregressive distributed lag (ARDL) bounds testing approach. The parameters are estimated through a long-run static solution of the estimated ARDL model and short-run dynamic solutions of the error correction model. The estimated models successfully pass diagnostic tests and both the long-run and short-run elasticities are found to be statistically significant. The study also indicates the existence of short-run and long-run causalities from electricity consumption and employment to economic growth. Results of this study show that electricity serves as an important driver of economic growth. Based on these results, several policy prescriptions on energy use and economic development are suggested for China.

Keywords

Electricity consumption Economic growth China Granger causality ARDL model Cointegration 

Notes

Acknowledgments

This work was funded by the Fundamental Research Funds for Fujian Province Public-interest Scientific Institution, Grant 2017R1101003-7, and the National Natural Science Foundation of China (NSFC), Grant 40701063. We also sincerely thank Prof. Yusheng Yang of Fujian Normal University for your kind support in this work.

References

  1. Abosedra S, Dah A, Ghosh S (2009) Electricity consumption and economic growth, the case of Lebanon. Appl Energy 86:429–432CrossRefGoogle Scholar
  2. Akinlo AE (2009) Electricity consumption and economic growth in Nigeria: evidence from cointegration and co-feature analysis. J Policy Model 31:681–693CrossRefGoogle Scholar
  3. Altinay G, Karagol E (2005) Electricity consumption and economic growth: evidence from Turkey. Energy Econ 27:849–856CrossRefGoogle Scholar
  4. Asafu-Adjaye J (2000) The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries. Energy Econ 22:615–625CrossRefGoogle Scholar
  5. Chandran VGR, Sharma S, Madhavan K (2010) Electricity consumption–growth nexus: the case of Malaysia. Energy Policy 38:606–612CrossRefGoogle Scholar
  6. Chen S-T, Kuo H-I, Chen C-C (2007) The relationship between GDP and electricity consumption in 10 Asian countries. Energy Policy 35:2611–2621CrossRefGoogle Scholar
  7. Engle RF, Granger CWJ (1987) Co-integration and error correction: representation, estimation, and testing. Econometrica 55:251–276CrossRefGoogle Scholar
  8. Fuinhas JA, Marques AC (2012) Energy consumption and economic growth nexus in Portugal, Italy, Greece, Spain and Turkey: an ARDL bounds test approach (1965–2009). Energy Econ 34:511–517CrossRefGoogle Scholar
  9. Ghosh S (2002) Electricity consumption and economic growth in India. Energy Policy 30:125–129CrossRefGoogle Scholar
  10. Ghosh S (2009) Electricity supply, employment and real GDP in India: evidence from cointegration and Granger-causality tests. Energy Policy 37:2926–2929CrossRefGoogle Scholar
  11. Glasure YU (2002) Energy and national income in Korea: further evidence on the role of omitted variables. Energy Econ 24:355–365CrossRefGoogle Scholar
  12. Golam Ahamad M, Nazrul Islam AKM (2011) Electricity consumption and economic growth nexus in Bangladesh: revisited evidences. Energy Policy 39:6145–6150CrossRefGoogle Scholar
  13. Ho C-Y, Siu KW (2007) A dynamic equilibrium of electricity consumption and GDP in Hong Kong: an empirical investigation. Energy Policy 35:2507–2513CrossRefGoogle Scholar
  14. Hu J-L, Lin C-H (2008) Disaggregated energy consumption and GDP in Taiwan: a threshold co-integration analysis. Energy Econ 30:2342–2358CrossRefGoogle Scholar
  15. Jahangir Alam M, Ara Begum I, Buysse J, Van Huylenbroeck G (2012) Energy consumption, carbon emissions and economic growth nexus in Bangladesh: cointegration and dynamic causality analysis. Energy Policy 45:217–225CrossRefGoogle Scholar
  16. Johansen S (1988) Statistical analysis of cointegration vectors. J Econ Dyn Control 12:231–254CrossRefGoogle Scholar
  17. Johansen S, Juselius K (1990) Maximum likelihood estimation and inferences on cointegration with approach. Oxf Bull Econ Stat 52:169–209CrossRefGoogle Scholar
  18. Jumbe CBL (2004) Cointegration and causality between electricity consumption and GDP: empirical evidence from Malawi. Energy Econ 26:61–68CrossRefGoogle Scholar
  19. Kouakou AK (2011) Economic growth and electricity consumption in cote d'Ivoire: evidence from time series analysis. Energy Policy 39:3638–3644CrossRefGoogle Scholar
  20. Kraft J, Kraft A (1978) On the relationship between energy and GNP. Journal of Energy and Development 3:401–403Google Scholar
  21. Kumar Narayan P, Singh B (2007) The electricity consumption and GDP nexus for the Fiji Islands. Energy Econ 29:1141–1150CrossRefGoogle Scholar
  22. Lai TM, To WM, Lo WC, Choy YS, Lam KH (2011) The causal relationship between electricity consumption and economic growth in a gaming and tourism center: the case of Macao SAR, the People’s Republic of China. Energy 36:1134–1142CrossRefGoogle Scholar
  23. Lee C-C, Chang C-P (2005) Structural breaks, energy consumption, and economic growth revisited: evidence from Taiwan. Energy Econ 27:857–872CrossRefGoogle Scholar
  24. Lorde T, Waithe K, Francis B (2010) The importance of electrical energy for economic growth in Barbados. Energy Econ 32:1411–1420CrossRefGoogle Scholar
  25. Mozumder P, Marathe A (2007) Causality relationship between electricity consumption and GDP in Bangladesh. Energy Policy 35:395–402CrossRefGoogle Scholar
  26. Narayan PK (2005) The saving and investment nexus for China: evidence from cointegration tests. Appl Econ 37:1979–1990CrossRefGoogle Scholar
  27. Narayan PK, Prasad A (2008) Electricity consumption-real GDP causality nexus: evidence from a bootstrapped causality test for 30 OECD countries. Energy Policy 36:910–918CrossRefGoogle Scholar
  28. Narayan PK, Singh B (2007) The electricity consumption and GDP nexus for the Fiji Islands. Energy Econ 29:1141–1150CrossRefGoogle Scholar
  29. Narayan PK, Smyth R (2005) Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests. Energy Policy 33:1109–1116CrossRefGoogle Scholar
  30. National Bureau of Statistics of China (2010) China Statistical Yearbook 2009. China Statistics Press, BeijingGoogle Scholar
  31. Odhiambo NM (2009a) Electricity consumption and economic growth in South Africa: a trivariate causality test. Energy Econ 31:635–640CrossRefGoogle Scholar
  32. Odhiambo NM (2009b) Energy consumption and economic growth nexus in Tanzania: an ARDL bounds testing approach. Energy Policy 37:617–622CrossRefGoogle Scholar
  33. Ouédraogo IM (2010) Electricity consumption and economic growth in Burkina Faso: a cointegration analysis. Energy Econ 32:524–531CrossRefGoogle Scholar
  34. Ozturk I, Acaravci A (2011) Electricity consumption and real GDP causality nexus: evidence from ARDL bounds testing approach for 11 MENA countries. Appl Energy 88:2885–2892CrossRefGoogle Scholar
  35. Pao H-T (2009) Forecast of electricity consumption and economic growth in Taiwan by state space modeling. Energy 34:1779–1791CrossRefGoogle Scholar
  36. Perron P (1989) The great crash, the oil price shock, and the unit root hypothesis. Econometrica 57:1361–1401CrossRefGoogle Scholar
  37. Pesaran MH, Shin Y (1999) An autoregressive distributed lag modelling approach to cointegration analysis. In: Strom S (ed) Econometrics and economic theory in the 20th century: the Ragnar Frisch Centennial Symposium. Cambridge University Press, CambridgeGoogle Scholar
  38. Pesaran MH, Shin Y, Smith RJ (2001) Bounds testing approaches to the analysis of level relationships. J Appl Econ 16:289–326CrossRefGoogle Scholar
  39. Shahbaz M, Lean HH (2012) The dynamics of electricity consumption and economic growth: a revisit study of their causality in Pakistan. Energy 39:146–153CrossRefGoogle Scholar
  40. Shahbaz M, Tang CF, Shahbaz Shabbir M (2011) Electricity consumption and economic growth nexus in Portugal using cointegration and causality approaches. Energy Policy 39:3529–3536CrossRefGoogle Scholar
  41. Shiu A, Lam P-L (2004) Electricity consumption and economic growth in China. Energy Policy 32:47–54CrossRefGoogle Scholar
  42. Soytas U, Sari R (2007) The relationship between energy and production: evidence from Turkish manufacturing industry. Energy Econ 29:1151–1165CrossRefGoogle Scholar
  43. Squalli J (2007) Electricity consumption and economic growth: bounds and causality analyses of OPEC members. Energy Econ 29:1192–1205CrossRefGoogle Scholar
  44. Stern DI (1993) Energy and economic growth in the USA: a multivariate approach. Energy Econ 15:137–150CrossRefGoogle Scholar
  45. Stern DI (1997) Limits to substitution and irreversibility in production and consumption: a neoclassical interpretation of ecological economics. Ecol Econ 21:197–215CrossRefGoogle Scholar
  46. Stern DI (2000) A multivariate cointegration analysis of the role of energy in the US macroeconomy. Energy Econ 22:267–283CrossRefGoogle Scholar
  47. Tsani SZ (2010) Energy consumption and economic growth: a causality analysis for Greece. Energy Econ 32:582–590CrossRefGoogle Scholar
  48. Wang YA, Chen J, Lu GF (2011a) Temporal causal relationship between resource use and economic growth in East China. Chin World Econ 19:93–108CrossRefGoogle Scholar
  49. Wang Y, Wang Y, Zhou J, Zhu X, Lu G (2011b) Energy consumption and economic growth in China: a multivariate causality test. Energy Policy 39:4399–4406CrossRefGoogle Scholar
  50. Wang Y, Zhang C, Lu A, Li L, He Y, ToJo J, Zhu X (2017) A disaggregated analysis of the environmental Kuznets curve for industrial CO2 emissions in China. Appl Energy 190:172–180Google Scholar
  51. Weidou N, Johansson TB (2004) Energy for sustainable development in China. Energy Policy 32:1225–1229CrossRefGoogle Scholar
  52. Wolde-Rufael Y (2006) Electricity consumption and economic growth: a time series experience for 17 African countries. Energy Policy 34:1106–1114CrossRefGoogle Scholar
  53. World Energy Council (2010) Survey of Energy Resources 2010. World Energy Council, LondonGoogle Scholar
  54. Yoo S-H (2005) Electricity consumption and economic growth: evidence from Korea. Energy Policy 33:1627–1632CrossRefGoogle Scholar
  55. Yoo SH (2006) The causal relationship between electricity consumption and economic growth in the ASEAN countries. Energy Policy 34:3573–3582CrossRefGoogle Scholar
  56. Yoo S-H, Kwak S-Y (2010) Electricity consumption and economic growth in seven South American countries. Energy Policy 38:181–188CrossRefGoogle Scholar
  57. Yuan J, Zhao C, Yu S, Hu Z (2007) Electricity consumption and economic growth in China: cointegration and co-feature analysis. Energy Econ 29:1179–1191CrossRefGoogle Scholar
  58. Yuan J-H, Kang J-G, Zhao C-H, Hu Z-G (2008) Energy consumption and economic growth: evidence from China at both aggregated and disaggregated levels. Energy Econ 30:3077–3094CrossRefGoogle Scholar
  59. Zivot E, Andrews DWK (1992) Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. J Bus Econ Stat 10:251–270Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Institute of GeographyFujian Normal UniversityFuzhouChina
  2. 2.State Key Laboratory of Subtropical Mountain Ecology (Funded by Ministry of Science and Technology and Fujian Province), School of Geographical SciencesFujian Normal UniversityFuzhouChina
  3. 3.Department of Applied Mathematics and StatisticsJohns Hopkins UniversityBaltimoreUSA
  4. 4.Department of Environmental Health and EngineeringJohns Hopkins UniversityBaltimoreUSA

Personalised recommendations