Estimation of Electricity Demand Function for Algeria: Revisit of Time Series Analysis

Naceur Khraief, Muhammad Shahbaz, Hrushikesh Mallick () and Nanthakumar Loganathan

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims to empirically re-examine whether economic growth has effect on electricity consumption for Algerian economy. We have incorporated urbanisation and trade openness in electricity demand function as additional determinants of electrictyy consumption for the period of 1971-2012. For empirical purpose, we have applied the recently developed combined cointegration test proposed by Bayer and Hanck (2013) and bounds testing approach to cointegration by Pesaran et al. (2001) for establishing the cointegration between the variables by accomodating structural breaks. The results expose that income growth leads to higher electricity demand along with urbanization being another major contributing factor of rising electricity demand. In contrast, trade openness leads to reduce electricity demand. The causal association between the variables is further exmained with the application of innovation accounting approach of Vector Autoregressive (VAR). The empirical evidence indicates the presence of the neutral effect between income growth and electricity use. Urbanization causes electricity use and electricity use causes urbanization in Granger sense.

Keywords: Electricity; Growth; Urbanization; Trade Openness (search for similar items in EconPapers)
JEL-codes: A1 (search for similar items in EconPapers)
Date: 2016-10-27, Revised 2016-11-01
New Economics Papers: this item is included in nep-ara and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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