Energy Consumption and Economic Growth: Empirical Evidence from the Southern African Development Community

Article type: Research Article

Authors: Nyasulu, Themba^a

Affiliations: [a] United Nations Economic Commission for Africa (UNECA), Addis Ababa, Ethiopia Corresponding author: Themba.Nyasulu@un.org

Abstract: Even though the pivotal role that energy plays in catalyzing economic development has received considerable theoretical backing among researchers, conflicting empirical findings from many developing regions across the globe have generated a raging debate about the validity of this thesis. By employing panel causality and cointegration techniques, this paper wades into this debate by examining the energy consumption’economic growth nexus in 15 countries of the Southern African Development Community (SADC) using data from 1990 to 2015. Overall the study finds that a bi-directional/feedback causality relationship exists in the SADC region, suggesting that energy consumption and economic growth are complements in SADC’s economic development. Furthermore, energy consumption is found to exert a positive short-run effect on economic growth even though the effect is higher in low-income SADC countries relative to middle-income SADC countries. The study’s findings suggest that SADC countries should strengthen the implementation of energy conservation measures, including promotion of energy-saving bulbs, encouraging the use of solar water heaters in residential areas, and promoting commercial energy-efficient lighting. These measures will help to manage demand and allow power and energy savings realized to be channeled to productive sectors and stimulate economic growth in the SADC region.

Keywords: Energy consumption, Economic growth, Panel cointegration and causality, Generalized methods of moments (GMM) approach, SADC

DOI: 10.3233/RED-160201

Journal: Journal of Resources, Energy and Development, vol. 16, no. 2, pp. 39-54, 2019