Electricity Consumption and Exports Growth: Revisiting the Feedback Hypothesis

Bosupeng, Mpho (2017): Electricity Consumption and Exports Growth: Revisiting the Feedback Hypothesis. Published in: Journal of Economics and Sustainable Development , Vol. 12, No. 8 (2017): pp. 47-55.

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 exhibited statistically long run affiliations between exports income and electricity consumption. Comparatively, the Saikkonen and Lu ̈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.

• Item Type: MPRA Paper
• Language: English
• Keywords: exports; energy demand; electricity consumption; economic growth; feedback hypothesis.
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

References

Akinlo, A. E. (2009) “Electricity consumption and economic growth in Nigeria: evidence from co-integration and co-feature analysis” Journal of Policy Modeling, 31: 681-693.

Amador, J. (2012) “Energy content in manufacturing exports: A cross country analysis” Energy Economics, 34: 1074:1081.

Riggi, M. & Venditti, F. (2015) “The time varying effects of oil price shocks on Euro-Area exports” Journal of Economic Dynamics & Control, 59: 78-94.

Chang, Chun-Ping, Na Berdiev, A. Lee, & Chien-Chiang (2013) “Energy exports, globalization and economic growth: The case of South Caucasus” Economic Modelling, 33: 383-346.

Dedeoglu, D. & Kaya H. (2013) “Energy use, exports, imports and GDP: New evidence from the OECD countries” Energy Policy, 57: 469-476.

Engle, R. F., & Granger, C. W. (1987) “Cointegration and error correction: representation, estimation, and testing” Econometrica, 55: 251-276. doi:10.2307/1913236.

Faria, J. R. Mollick, A. V, Albuquerque P. H. & Leon-Ledesma, M. A. (2009) “The effects of oil price on China’s exports” China Economic Review, 20: 793-805.

Granger, C. W. J., Huang, B- N. & Yang, C-W. (2000) “A bivariate causality between stock prices and exchange rates: evidence from recent Asian flu” The Quarterly Review of Economics and Finance, 40: 337-354.

Granger, C. J. (1981) “Some properties of time series data and their use in econometric model specification” Journal of Econometrics, 55: 251-276. doi:10.1016/0304-4076(81)90079-8.

Granger, C. W. J. (1969) “Investigating causal relations by econometric models: cross spectral methods” Econometrica, 37: 424- 438. doi:10.2307/1912791.

Granger, C. W. J., & Weiss, A. A. (1983) “Time series analysis of error correction models”. In Karlim, S; Amemiya, T., & Goodman, L. A. Studies in Economic Time Series and Multivariate Statistics, (Academic Press: New York). doi:10.1016/b978-0-12-398750-1.50018-8.

Johansen, S. (1988) “Statistical analysis of cointegration vectors” Journal of Economic Dynamics and Control, 12: 231-254. doi:10.1016/0165-1889(88)90041-3.

Kahrl, F. & Roland-Holst, D. (2008) “Energy and exports in China” China Economic Review, 19: 649-658.

Korsakiene, R. Tvaronavic ̌iene, M. & Smaliukiene, R. (2014) “Impact of Energy on Industrial Sector Development and Exports: Lithuania in the context of Baltic States” Procedia Social and Behavioral Sciences, 110: 461-469.

Mallory, M. & Lence, S. H. (2012) “Testing for cointegration in the presence of moving average errors” Journal of Time Series Econometrics, 4: 1-66. doi: 10.1515/1941-1928.1124.

Mignard, D. Harrison, G. P. & Pritchard, C.L. (2007) “Contribution of wind power and CHP to exports from Western Denmark during 2000-2004” Renewable Energy, 32: 2516-2528.

Narayan, P. K., & Smyth, R. (2008) “Energy consumption and real GDP in G7 countries: new evidence from panel cointegration with structural breaks” Energy Economics, 30: 2331-2341.

Saikkonen, P. & Lu ̈tkepohl, H. (2000) “Trend adjustment prior to testing for the cointegrating rank of a vector autoregressive process” Journal of Time Series Analysis, 21: 435-456.

Sharma, K. (2003) “Factors determining India’s export performance” Journal of Asian Economics, 14: 435-446.

Stock, J. H. (1987) “Asymptotic properties of least squares estimates of cointegration vectors” Econometrica, 55: 1035-1056. doi:10.2307/1911260.

Tekin, R. B. (2012) “Economic growth, exports and foreign direct investment in least developed countries: a panel Granger causality analysis” Economic Modelling, 29: 868-878.

Urpelainen, J. (2011) “Export orientation and domestic electricity generation: effects on efficiency innovation in selected sectors” Energy Policy, 39: 5638-5646.

Zheng, Y. Qi, J. & Chen, X. (2011) “The effects of increasing exports on industrial energy intensity in China” Energy Policy, 29: 2688-2698.