Economic Growth and Electricity Consumption in China: A Multivariate Analysis
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| Title | Economic Growth and Electricity Consumption in China: A Multivariate Analysis
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| Author | Fang Debin,Ye Chun and Yu Qian |
| Organization | Economics and Management School,Wuhan University; State Electricity Regulatory Commission;School of Economics, Wuhan University of Technology |
| Email | dbfang@whu.edu.cn |
| Key Words | Economic Growth; Electricity Consumption; Granger Causality Test; Principal Component Regression |
| Abstract | In this paper we examine the causal relationship between electricity consumption and economic growth in China during 1980-2009. We incorporate the gross fixed capital formation and the employment level in the secondary industry as an intermittent variable in the bivariate model between electricity consumption and economic growth—thereby creating a multivariate analysis framework. Our empirical results show that there is a distinct bidirectional causality between electricity consumption and economic growth in China. In addition, the results show that the gross fixed capital formation in China Granger causes economic growth; there is no causality between the employment level in the secondary industry and economic growth. Moreover, there is a long-run equilibrium relationship among those four variables; the accuracy of regression equation models was formed by using the principal component regression. The study, therefore, recommends that policies geared towards the expansion of the electricity infrastructure should be intensified in China in order to cope with the increasing demand exerted by the country's strong economic growth and rapid industrialisation programme.Economic Growth; Electricity Consumption; Granger Causality Test; Principal Component Regression |
| Serial Number | WP147 |
| Time | 2011-11-01 |
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