ENERGY CONSUMPTION AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM WEST AFRICA

Folorunso Sunday AYADI

Abstract


Energy can either limit or accelerate production processes and consequently economic growth. This study investigated the validity of any of the four hypotheses (conservation, growth, feedback and neutrality) formulated in the study of the relationship between energy consumption and economic growth. This study analyzed these hypotheses in West African context by applying the stationarity tests and Pedronicointegration as well as causality tests (Granger-Causality, Vector Autoregressive (VAR) Causality and Toda-Yamamoto Causality) and regression analysis (Ordinary Least Squares (OLS), Panel Fully Modified Least Squares (FMOLS) and Dynamic Least Squares (DOLS)) in accomplishing the investigation. The study found per capita GDP to Granger cause energy consumption in West Africa and the Causality runs from per capita GDP to energy consumption. Energy consumption (EPC) and Gross Domestic Product per capita (GDPPC) are positively related. Economic growth significantly explains energy consumption in West Africa. A dollar increase in Per Capita GDP other things being constant will cause energy consumption to increase by 0.03 US dollar. Based on the above therefore, since economic growth implies more energy consumption, and at present, energy consumption in West Africa is predominantly fossil-based which is unsustainable as it is non-renewable. West African governments must work to encourage more energy efficient production processes. In addition to this, government must put up policies to generate and utilize more renewable energy. This will reduce the pollution associated with fossil-based energy sources.

Keywords: Economic growth, Energy consumption, Energy efficiency.

JEL Classifications: Q32, Q43, Q57


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