Electricity consumption and economic growth in OPEC countries: a cointegrated panel analysis

Ghahreman Abdoli, Yazdan Gudarzi Farahani and Seyedmasood Dastan

OPEC Energy Review, 2015, vol. 39, issue 1, 1-16

Abstract: This paper uses empirical evidence to examine the causality relationship between electricity consumption and economic growth in OPEC countries by using annual data (1980–2011); this paper also utilises the panel cointegration and panel-based error correction approach models and framework. To the best of the authors' knowledge, most of the studies in this field have applied the error correction models, auto regressive distributed lag and panel data based on fixed-effect model in which coefficients obtained by these models cannot be deemed as a general finding applicable for other countries. The superiority of our article is in applying full modified ordinary least square estimation method for heterogeneous panels; our study also has stable and consistent coefficients and is also a dynamic model. Moreover, with regard to previous studies, our paper includes more countries which increase the reliability of the results. The results indicate that a long-run relationship exists between real gross domestic product (GDP), electricity consumption and trade activities that involve export and import (control variable). The short-run results also indicate the importance of electricity consumption to economic growth and vice versa, supporting the feedback hypothesis which asserts that energy policies oriented towards improvements in electricity consumption efficiency would not adversely affect real GDP. It also apears that policies for energy efficiency have no statistically significant impact on economic growth in long run.

Date: 2015
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