Causal Linkages between Electricity Consumption and GDP in Thailand: Evidence from the Bounds Test

Abstract

This paper investigates the causal relationship between electricity consumption and real GDP by applying the bounds testing for cointegration in a multivariate framework. The error correction mechanism is employed to detect causal relationship in the presence of cointegration among three variables. Empirical results for Thailand during 2001Q1 and 2014Q2 suggest that there is long-run unidirectional causality between electricity consumption and real GDP. The source of causation in the long run is found by the significance of the error correction terms in the Wald F-test. In the short run, bidirectional causal relationship between electricity consumption and economic growth is observed. The findings give implications for electricity efficiency and alternative energy sources in the long run.

Keywords: Causality, electricity consumption, economic growth

JEL Classification: Q43, C32