Revisiting the causality between electricity consumption and economic growth in South Africa : a bootstrap rolling-window approach

摘要

This paper revisits the causality relationship between electricity consumption and economicgrowth in South Africa for the period 1972-2009 using annual data and takes intoconsideration time variation in causal relationships using bootstrap rolling Granger noncausalitytests. Full-sample Granger causality tests find absence of any causality betweenelectricity consumption and economic growth. However, Parameter stability tests indicatethat there is instability in our VAR model and therefore findings from full-sample Grangercausality test cannot be relied upon. This motivates the use of bootstrap rolling windowestimation to investigate the electricity consumption-growth nexus which accounts for thetime varying causal link between the two variables. The results indicate two sub periods,2002-2003 and 2005-2006, whereby electricity consumption had a causal effect on GDPsupporting the growth hypothesis. The policy implication is that energy conservation policiescould be a hindrance on economic growth since electricity consumption seems to be thedriving force behind GDP during these sub periods. Apart for these brief sub periods, theresults indicate no causality between the two series. On the contrary, we find that GDP has nopredictive power over electricity consumption for the entire sample considered.