Modelling Electric Power Consumption, Energy Consumption and Economic Growth in Zimbabwe: Cointegration and Causality Analysis

This paper examines the causal relationship between electric power consumption, energy consumption and economic growth in Zimbabwe during the period 1970-2014. The Chow test showed that there is a structural break in the year 2008. Compared to previous studies, our model include both electric power consumption and energy consumption in influencing economic growth and for this purpose, Johansen cointegration test and Vector Error Correction Model (VECM) were used to analyse the short-run and long-run dynamics of the variables in the full sample (1970-2014). In the short-run model, the study results failed to establish any causal relationship between energy consumption, electric power consumption and economic growth in the short run. However, in the long run, there was a unidirectional causality running from electric power consumption and energy consumption to economic growth. The long-run model showed that electric power consumption has impact on economic growth while energy consumption was found to have no impact on economic growth. In the sub-sample (1970-2008), Autoregressive Distributed Lag (ARDL) model was used and a long-run relationship was found to exist between the variables but however, no short-run relationship was found. We conclude that in the Zimbabwean context, the growth hypothesis is supported in the long-run. Therefore, the study recommends relevant authorities to ensure supply of electricity by increasing investment in energy and electricity generation capacity since its availability in the long run is critical for economic growth