Energy consumption and economic growth nexus in Somalia: an empirical evidence from nonlinear ARDL technique

Abstract

The objective of this study is to ascertain the asymmetric impact of energy consumption on economic growth in Somalia for the period 1985–2017. A novelty econometric method of the Nonlinear Autoregressive distributed lag (NARDL) technique and the Granger causality test are employed to confirm the aim of the study. The empirical findings revealed the presence of asymmetric co-integration between energy consumption and economic growth in the long run. Both positive and negative shocks in energy consumption enhance economic growth in Somalia in the long run, even though, the positive shock has a stronger significant effect on economic growth in the long run. In contrast, a negative shock in energy consumption causes economic growth, thus, confirming the energy-led growth hypothesis. Hence, this calls for the policymakers to devise investment policies that are aimed at the improvement of foreign and local investments in energy sector.