The causal link between electricity transmission, distributional losses and economic growth in Ghana

Abstract

Despite the growing literature on the causal association between electricity supply and economic growth, little is known about the causal linkage between electricity transmission and distributional losses and economic growth, particularly in Ghana. The paper studies the causal association between electricity transmission, distributional losses and economic growth in Ghana. Further, we interacted ETDL with electricity price to examine their combined impact on Ghana's gross domestic product. We utilised time series data from the period 1971 to 2014. Given that our data span is relatively shorter, we utilised the Toda and Yamamoto and Autoregressive distributed lag model (ARDL) methods. This is so because these time series approaches can produce efficient, reliable and eliminate spurious regression estimates even if the sample size is relatively short. Our ARDL estimates suggest that ETDL exert an adverse impact on economic growth while the Toda and Yamamoto estimates suggest that economic growth has a strong influence on ETDL and not the other way round, supporting the growth-led energy hypothesis. Also, the interactive effect of ETDL and electricity prices on economic growth was negative and statistically significant.