By applying an ARDL bounds testing approach and causality test to investigate the electricity consumption and production with economic growth: Empirical evidence from Pakistan

Abstract

Purpose

The purpose of this paper is to explore and investigate the electricity consumption and production and its linkage to economic growth in Pakistan.

Design/methodology/approach

The authors used an augmented Dickey–Fuller unit root test to check the stationarity of the variables, while an autoregressive distributed lag (ARDL) bounds testing approach and causality test were applied to investigate the variables long-term association with the economic growth.

Findings

The study results show that electricity consumption in the agriculture, commercial and industrial sector has significant association with economic growth, while electricity consumption in the household and street lights demonstrate a non-significant association with the economic growth. Furthermore, results also exposed that electricity production from coal, hydroelectric, natural gas, nuclear and oil sources have significant association with the economic growth of Pakistan.

Originality/value

This study made a contribution to the literature regarding electricity consumption and production with economic growth in Pakistan by using an ARDL bounds testing approach and causality test. This study provides a guideline to the government of Pakistan that possible steps are needed to improve the electricity production and supply to fulfill the country demand.

Citation

Rehman, A., Irfan, M., Hena, S. and Chandio, A.A. (2020), "By applying an ARDL bounds testing approach and causality test to investigate the electricity consumption and production with economic growth: Empirical evidence from Pakistan", World Journal of Science, Technology and Sustainable Development, Vol. 17 No. 2, pp. 182-199. https://doi.org/10.1108/WJSTSD-08-2019-0054