Consumption of Electricity and Industrial Growth in the Case of Ghana

Abstract

We examine the causative relationship amongst electricity consumption and industrial growth in Ghana for the period of 1971 to 2014. The results of the ARDL bounds test showed that long-run relationship exists among the variables. The error correction term was also significant and negatively signed providing further evidence of long-run relationship. Contrary to the widespread belief that electricity consumption spurs productivity, the study reveals that electricity consumption has a negative impact on manufacturing sector output in Ghana. This occurrence could be explained by the fact that whiles the average growth in electricity consumption in Ghana is positive, the share of industrial sector’s electricity consumption continues to decline on the average. The Toda-Yamamoto test shows a unidirectional causality running from electricity consumption to industrial growth in Ghana, supporting the growth hypothesis in the extant literature.