Acta Universitatis Danubius. Œconomica, Vol 14, No 5 (2018)

Economic Growth and Electricity Consumption in a Multivariate Framework: Case for Zimbabwe 1980 to 2016.

Laurine Chikoko, Laurine Chikoko, Tawedzerwa Ngundu, Kennedy Kupeta

Abstract


The paper investigates the relationship between economic growth and electricity consumption in a multivariate framework for the period 1980 to 2016 in Zimbabwe. The study uses a single step error correction framework to assess the granger causality between electricity consumption, economic growth and investment. The Granger causality tests confirm the existence of a bi-directional causality between electricity consumption and economic growth. Electricity also granger causes investment in Zimbabwe. The study shows that there is a long run relationship between electricity, investment and economic growth in Zimbabwe. In long run, a 1% increase in electricity consumption raises economic growth by 0.7% while investment growth raises output by 0.4%. The results suggest that consumption of electricity is a prerequisite and a binding constraint to achieving higher economic growth in Zimbabwe. In order to boost economic growth, the country needs to profoundly invest in electricity infrastructure.


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