Energy consumption and economic growth modelling in SADC countries: An application of the VAR Granger causality analysis

Abstract

We investigate the relationship between energy consumption and economic growth in ten SADC countries using the VAR model over the period 1971 to 2015. We convert variables to growth rates before we use them in the model. Results indicate unidirectional causality running from real economic growth to energy consumption in Angola, Democratic Republic of Congo, Mauritius, Namibia; bidirectional causality between energy consumption and economic growth in Botswana and Mauritius, and no causality in Mozambique, South Africa, Zambia and Zimbabwe. In countries where real economic growth Granger causes energy consumption the conservation hypothesis is confirmed. In countries where no causality is found the neutrality hypothesis is confirmed which implies economic growth and energy consumption independent of each other. The feedback hypothesis confirmed in Botswana and Mauritius implies that an increase in the economic output will increase the level of energy consumption while an energy conservation policy will adversely affect economic output.