The Dynamics of Electricity Consumption, Energy Use and GDP in Bangladesh

Abu Hasan
Anita Zaman
Zohirul Islam Sikder
Abdul Wadud
JEL codes: 
C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models, O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence, Q43 - Energy and the Macroeconomy.
The aim of this paper is to investigate the relationship between electricity consumption, energy use and GDP in Bangladesh, using annual data covering the period from 1980 to 2014. The bounds testing (ARDL) approach reveal that electricity consumptions have significant and positive long run impact on GDP and vice versa. The results of the estimated ARDL-ECM models indicate that long-run causality is directing from electricity consumptions and energy use to GDP, and GDP and energy use to electricity consumptions. Thus, in the long run, we find evidence of the feedback hypothesis suggesting the interdependent relationship between electricity consumption and economic growth in which causation runs in both directions and serve as complements. Finally, this study also explores that the relationship among the variables is insignificant in the short-run. Thus, the empirical results of this study might provide a better enthusiastic to the policymakers of Bangladesh to execute the Power System Master Plan (PSMP) 2016 to become a high-income country by 2041.
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