Empowering Progress: Investigating the Electricity Consumption-Economic Growth Nexus in Ghana

Abstract

This study investigates the causal relationship between electricity consumption and economic growth in Ghana from 1971 to 2007. Understanding this relationship is crucial for formulating effective energy conservation strategies and environmental policies. Existing literature on Ghana presents conflicting findings, highlighting the need for further research to clarify the energy-growth nexus. Given the limited empirical evidence available, this study aims to determine the direction of causality between electricity consumption and economic growth, contributing valuable insights to policy discussions. The study employs the Granger Causality test to analyze the causal linkage between electricity consumption and economic growth. The results reveal a unidirectional causality from economic growth to electricity consumption, supporting the Growth-led-Energy Hypothesis. This suggests that economic expansion drives electricity consumption rather than the reverse. The findings imply that Ghana can implement electricity conservation measures without adversely affecting economic growth. Since electricity consumption does not significantly influence economic output, policymakers can prioritize energy efficiency and sustainability initiatives. Implementing targeted conservation policies and investing in renewable energy sources will enhance energy security while maintaining economic stability. This study offers important policy recommendations, emphasizing the need for efficient energy management. Ghana should focus on sustainable energy strategies, ensuring adequate electricity supply while reducing wasteful consumption. By aligning energy policies with economic growth trends, the country can optimize energy use and enhance long-term development. Future research should explore sectoral energy demand patterns to refine energy policies further and ensure balanced growth across all industries.