Electricity Consumption and Exports Growth: Revisiting the Feedback Hypothesis

Abstract

The dynamic relationship between exports and energy has been an interesting area of research in macroeconomics. This paper contributes to the extant literature by examining the relationship between electricity consumption and exports revenue for forty different economies as from 1980-2012. The study commences by examining the time series for unit roots using the Augmented Dickey-Fuller (ADF) test. The results of the Johansen cointegration test reveal that twenty-one economies under investigation exhibit statistically long run affiliations between exports income and electricity consumption. Comparatively, the Saikkonen and L tkepohl test proved that exports and electricity consumption are statistically cointegrated in the long run for all economies. The Granger causality test showed that exports income promote an increase in electricity consumption. However, exports in some economies were induced by electricity consumption. Most importantly, the validity of the feedback hypothesis is affirmed as bidirectional causal relationships between exports and electricity consumption surface in multiple economies.

Keywords: exports, energy demand, electricity consumption, economic growth, Feedback hypothesis.