Electricity Consumption and Economic Growth in Qatar: Long-Term and Short-Term Dynamics

Abstract

This paper investigates the relationship between electricity consumption and economic growth in the Kingdom of Qatar over the period from 1980 to 2018. To analyze this relationship, we employ the Johansen-Fisher cointegration approach, which allows us to test for a long-term equilibrium relationship between the variables. The results indicate that electricity consumption and economic growth are indeed cointegrated, suggesting that these variables move together over the long term. Furthermore, we use the vector error correction model Granger causality analysis to examine the direction of causality between electricity consumption and economic growth. The analysis reveals a feedback effect between the two variables in the long run. This means that not only does electricity consumption influence economic growth, but economic growth also affects electricity consumption. This bidirectional causality implies that changes in one variable will have a long-term impact on the other, highlighting the interdependence between electricity use and economic development in Qatar. In the short run, the results show that electricity consumption Granger causes economic growth. This indicates that fluctuations in electricity consumption can predict changes in economic growth over shorter time periods. The short-term causality from electricity consumption to economic growth underscores the importance of a stable and reliable electricity supply for sustaining economic activities and growth in the country. These findings have significant policy implications for the Kingdom of Qatar. Given the crucial role of electricity consumption in driving economic growth, it is essential for policymakers to ensure a reliable and efficient electricity supply. Investment in energy infrastructure, diversification of energy sources, and implementation of energy efficiency measures can help achieve this goal. Moreover, since economic growth also feeds back into increased electricity consumption, it is important to plan for future energy needs in line with economic development goals. By focusing on enhancing the electricity infrastructure and efficiency, Qatar can foster an environment that supports continuous economic progress.