Econometric modelling of the link between investment and electricity consumption in Ghana

Asuamah Yeboah, Samuel (2018): Econometric modelling of the link between investment and electricity consumption in Ghana.

Abstract

The study examines the long run effect of investment (proxied by gross fixed capital formation) on electricity consumption for Ghana, for the period 1971-2011, by employing annual time series secondary data from World Bank database (World development indicator). The Augmented Dickey Fuller (ADF) and Kwiatkowski-Philips-Schmidt-Shin (KPSS) tests were used to analyse the stationarity features of the data used in levels and in their first differences. The empirical verification was done using the Autoregressive Distributed Lag model (ARDL). The findings of the study indicate the data used are non-stationary in levels, however, stationary in their first difference. Investment and electricity consumption are cointegrated according to the cointegration test performed. There are both stable short run and long run relationship between investment and electricity consumption. Investment is an appropriate policy tool for electricity consumption management in both short run and long run. Further studies in the area of stationarity with structural breaks, cointegration with structural breaks, causality analysis, and multivariate modelling of investment-electricity consumption link is worth doing since the current study did not consider these issues.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cointegration, energy, long run, fixed capital formation
• Subjects: D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P28 - Natural Resources ; Energy ; Environment; P - Economic Systems > P4 - Other Economic Systems > P45 - International Trade, Finance, Investment, and Aid; P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy ; Legal Institutions ; Property Rights ; Natural Resources ; Energy ; Environment ; Regional Studies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R42 - Government and Private Investment Analysis ; Road Maintenance ; Transportation Planning; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R53 - Public Facility Location Analysis ; Public Investment and Capital Stock

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