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

Abstract

Investigating the interplay between electricity and economic growth holds significant ramifications for the formulation of energy conservation strategies and environmental policies. Nevertheless, the existing body of literature on the nexus between energy and economic growth in Ghana yields disparate findings, necessitating a comprehensive reassessment to discern more nuanced insights. This predicament poses significant challenges to the formulation of the country's energy policy. Extensive research is imperative to ascertain the causality relationship between energy and economic growth. However, the available evidence for Ghana is limited. Against this backdrop, this study aims to explore the direction of causality specifically between electricity, as a form of energy, and economic growth, contributing valuable insights to the ongoing discourse in the literature. The Granger Causality test was employed to examine the causal relationship between electricity consumption and economic growth spanning the period from 1971 to 2007. The findings indicate a unidirectional causality, wherein economic growth significantly influences electricity consumption. Hence, the data pertaining to Ghana substantiates the Growth-led-Energy Hypothesis. These results suggest that implementing electricity conservation measures is a viable and strategic option for the country.