Electricity Consumption and Economic Growth in Jordan: A Multivariate Approach
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Published
Sep 1, 2015
Abstract
This paper aims to examine the impact of electricity consumptionon economic growth in Jordan using annual data over the period 1985-2013.To achieve the goal, an Autoregressive Distributed Lag (ARDL) approach isimplemented to estimate a logarithmic form of the traditional production function(Cobb-Douglas), where output is a function of electricity, capital and labour.According to the results of the estimation,the estimated long-run elasticitiesof output with respect to electrical energy, capital and labor are 0.742, 0.194and 0.422, respectively; while the short-run estimates are 0.330, 0.086, and0.343, respectively. Granger-Causality test has shown a positive unidirectionalrelationship directed from electrical energy consumption towards economicgrowth supporting the hypothesis.
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Keywords
JordanEconomic growthElectricity ConsumptionARDLGranger Causality
References
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• Bekhet and Othman, N. (2011), Causality analysis among electricity consumption, Consumer expenditure, Gross domestic product (GDP) and foreign direct investment (FDI): Case study of Malaysia. Journal of Economics and International Finance Vol. 3(4), 228-235, April .
• Bernard, J., Idoudi, N., Khalaf, L. and Yélou, C. (2007), Finite sample multivariate structural change tests with application to energy demand models. Journal of Econometrics, 141, (2),1219-1244.
• Berndt, E. and Wood, D. (1975), Technology, Prices, and the derived demand for energy. Review of Economics and Statistics, 57, 259-268.
• Boyd, G. and Pang, J. (2000), Estimating the linkage between energy efficiency and productivity. Energy policy, 28, 289–296.
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• Francis, B., Lorde, T. and Waithe, K. (2010), The importance of electrical energy for economic Growth in Barbados. Energy Economics, Vol. 32, 1411-1420.
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• Lee, C. and Chiang, C. (2008), Energy consumption and economic growth in Asian countries: A more comprehensive analysis using panel data. Resource and Energy Economics, 30, 50-65.
• Lütkepohl, H. (1982), Non-causality due to omitted variables. Journal of Econometrics, 19 (2-3): 367-378.
• Mahadeven, R. and Asafu-Adjaye, J. (2007), Energy consumption, Economic growth and prices: A reassessment using panel VECM for developed and developing countries. Energy Policy,35, 2481-2490.
• Masih, R. (1997), On the temporal causal relationship between energy consumption, Real income and price: Some new evidence from asian NICs based on a multivariate cointegration/vector error-correction approach. Journal of Policy Modeling, Vol. 19, 417–440.
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• Narayan, P., and Smyth, R. (2005), Electricity consumption, Employment and real income in Australia: Evidence from multivariate granger causality tests. Energy Policy Vol. 33, 1109–1116.
• Ozturk, I. (2010), A literature Survey on Energy-Growth Nexus, Energy Policy, Vol. 38, No. 1
• Pesaran, M., Shin, Y., and Smith, R. (1996), Testing the existence of a long-run relationship. (DAE Working Paper Series, No. 9622) University of Cambridge, Department of applied economics: Cambridge.
• Pesaran, M. and Pesaran, B. (1997), Working with microfit 4.0: Interactive econometric analysis. Oxford University press, Oxford.
• Pesaran, M., Shin, Y. and Shin R. (2001), Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16: 289-326.
• Sami, J. and Makun, M. (2011), The relationship between exports, Electricity consumption and economic growth: Empirical evidence from Brazil. World review of business research, Vol. No. 5. November,28-37.
• Sari, R. and Soytas, U. (2007), The growth of income and energy consumption in six developing countries. Energy Policy, 35, 889-898.
• Shahateet, M. and Bdour, M. (2010),Consumption of electricity and oil in Jordan: A nonparametric analysis using b-splines. Dirasat, Volume 37, No. 2, 2010, 558- 569.
• Sims, C. (1972), Money, income and causality. American economic review, 62, 540-552
• Solow, R. (2000), Growth theory second edition oxford edition. Oxford University Press, New York.
• Stern, D. (1993), Energy and economic growth in USA, a multivariate approach. Energy Economics, 15 (2): 137–150.
• Stern, D. (2000), A multivariate cointegration analysis of the role of energy in the US economy. Energy Economics, 22 (2): 267–283.
• Tang, C. (2008), A Re-examination of the relationship between electricity consumption and economic growth in Malaysia. Energy Policy, Vol. 36, 3077-3085.
• World Bank Website ,( http://www.worldbank.org)
• Yuan, J., Kang, J., Zhao, C. and Hu, Z. (2008), Energy consumption and economic growth revisited: Evidence from China both at the aggregate and disaggregate level. Energy Economics, 30,3077–309.
• Ahmad, M. and Islam, A. (2011). Electricity consumption and economic growth nexus in Bangladesh: Revisited evidences; Energy policy, volume- 39, pp. 6145–6150.
• Ajlouni, S. A. (2015), Energy consumption and economic growth in Jordan: An ARDL bounds testing approach to cointrgration. Jordan Journal of Economic Sciences, Vol. 2. No.2
• Akinlo, A. (2008), Energy consumption and economic growth: Evidence from 11 African countries. Energy economics, 30, 2391–2400.
• Akinlo, A. (2009), Electricity consumption and economic growth in Nigeria: Evidence from cointegration and co-feature analysis. Journal of Policy Modeling doi:10.1016/j.jpolmod.2009.03.004
• Al-Iriani, M. (2006), Energy-GDP relationship revisited: An example from GCC countries using panel causality. Energy policy, 34, 3342–3350.
• Apergis, N. and Payne, J. (2009), The emissions, energy consumption, And growth nexus: Evidence from the commonwealth of independent states. Energy policy 38(1): 650-655
• Bekhet and Othman, N. (2011), Causality analysis among electricity consumption, Consumer expenditure, Gross domestic product (GDP) and foreign direct investment (FDI): Case study of Malaysia. Journal of Economics and International Finance Vol. 3(4), 228-235, April .
• Bernard, J., Idoudi, N., Khalaf, L. and Yélou, C. (2007), Finite sample multivariate structural change tests with application to energy demand models. Journal of Econometrics, 141, (2),1219-1244.
• Berndt, E. and Wood, D. (1975), Technology, Prices, and the derived demand for energy. Review of Economics and Statistics, 57, 259-268.
• Boyd, G. and Pang, J. (2000), Estimating the linkage between energy efficiency and productivity. Energy policy, 28, 289–296.
• Buysse, J., Begum, I., Alam, M., and Huylenbroeck, G. (2012), Energy consumption, carbon emissions and economic growth nexus in Bangladesh: Co-integration and dynamic causality analysis. Energy policy, Volume-45, 217–225. Central bank of Jordan, http://www.cbj.gov.jo
• Chang, T., Fang, W., and Wen, L. (2001), Energy consumption, Employment, Output and temporal causality: Evidence from Taiwan based on cointegration and error-correction modeling techniques. Applied Economics, Vol. 33, pp. 1045-1056.
• Chontanawat, J., Hunt, L. & Pierce, R. (2008). Does Energy Consumption Cause Economic Growth? Evidence from Systematic Study of Over 100 Countries. Journal of Policy Modeling, 30, 209-220. Department of statistics of jordan , http://web.dos.gov.jo/
• Engle, R., and Granger, C. (1987),.Cointegration and error correction representative, estimation and testing. Econometrica 55, 251-276.
• Francis, B., Lorde, T. and Waithe, K. (2010), The importance of electrical energy for economic Growth in Barbados. Energy Economics, Vol. 32, 1411-1420.
• Govindaraju, C., Madhavan K., and Sharma, S. (2010), Electricity consumption-Growth nexus: The case of Malaysia. Energy Policy, and Vol. 38:606-12.
• Guttormsen, A. (2004), Causality between energy consumption and economic growth: department of economics and resource management, Agriculture university of Norway. Norway.
• Johansen, S. and Juselius, K. (1990), Maximum likelihood estimation and inference on cointegration with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52, 169–210.
• Kraft, J., and Kraft, A., (1978), On the relationship between energy and GNP. Journal of Energy and Development, 3, 401-403.
• Lee, C. (2005), Energy consumption and GDP in developing countries: A cointegrated panel analysis. Energy economics, 27, 415-427.
• Lee, C. and Chiang, C. (2008), Energy consumption and economic growth in Asian countries: A more comprehensive analysis using panel data. Resource and Energy Economics, 30, 50-65.
• Lütkepohl, H. (1982), Non-causality due to omitted variables. Journal of Econometrics, 19 (2-3): 367-378.
• Mahadeven, R. and Asafu-Adjaye, J. (2007), Energy consumption, Economic growth and prices: A reassessment using panel VECM for developed and developing countries. Energy Policy,35, 2481-2490.
• Masih, R. (1997), On the temporal causal relationship between energy consumption, Real income and price: Some new evidence from asian NICs based on a multivariate cointegration/vector error-correction approach. Journal of Policy Modeling, Vol. 19, 417–440.
• Mehrara, M. (2007), Energy consumption and economic growth: The case of oil exporting countries. Energy Policy, 35, 2939-2945.
• Energy and mineral resources commission annual reports, (http: //www. emrc.gov.jo).
• Ministry of energy and mineral resources annual reports, (http://www.memr.gov.jo).
• Narayan, P., and Smyth, R. (2005), Electricity consumption, Employment and real income in Australia: Evidence from multivariate granger causality tests. Energy Policy Vol. 33, 1109–1116.
• Ozturk, I. (2010), A literature Survey on Energy-Growth Nexus, Energy Policy, Vol. 38, No. 1
• Pesaran, M., Shin, Y., and Smith, R. (1996), Testing the existence of a long-run relationship. (DAE Working Paper Series, No. 9622) University of Cambridge, Department of applied economics: Cambridge.
• Pesaran, M. and Pesaran, B. (1997), Working with microfit 4.0: Interactive econometric analysis. Oxford University press, Oxford.
• Pesaran, M., Shin, Y. and Shin R. (2001), Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16: 289-326.
• Sami, J. and Makun, M. (2011), The relationship between exports, Electricity consumption and economic growth: Empirical evidence from Brazil. World review of business research, Vol. No. 5. November,28-37.
• Sari, R. and Soytas, U. (2007), The growth of income and energy consumption in six developing countries. Energy Policy, 35, 889-898.
• Shahateet, M. and Bdour, M. (2010),Consumption of electricity and oil in Jordan: A nonparametric analysis using b-splines. Dirasat, Volume 37, No. 2, 2010, 558- 569.
• Sims, C. (1972), Money, income and causality. American economic review, 62, 540-552
• Solow, R. (2000), Growth theory second edition oxford edition. Oxford University Press, New York.
• Stern, D. (1993), Energy and economic growth in USA, a multivariate approach. Energy Economics, 15 (2): 137–150.
• Stern, D. (2000), A multivariate cointegration analysis of the role of energy in the US economy. Energy Economics, 22 (2): 267–283.
• Tang, C. (2008), A Re-examination of the relationship between electricity consumption and economic growth in Malaysia. Energy Policy, Vol. 36, 3077-3085.
• World Bank Website ,( http://www.worldbank.org)
• Yuan, J., Kang, J., Zhao, C. and Hu, Z. (2008), Energy consumption and economic growth revisited: Evidence from China both at the aggregate and disaggregate level. Energy Economics, 30,3077–309.
How to Cite
Al-Hazaimeh, Qutaiba Abdullah, and Ahmad Ibrahim Malawi. 2015. “Electricity Consumption and Economic Growth in Jordan: A Multivariate Approach”. Studies in Business and Economics 18 (2). https://doi.org/10.29117/sbe.2015.0088.
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Articles