Electricity consumption-economic growth nexus in China: evidence from provincial panel data

This paper applies the panel unit root test, heterogeneous panel cointegration test and panel causality analysis to investigate the relationship and direction of causality between electricity consumption and economic growth for 28 provinces in China during period of 1985-2008. The empirical results show that there are cointegration relationship and long-run bidirectional causality between electricity consumption and economic growth for the whole, east, middle, and west area of China. In addition, for short-run causality, there is a unidirectional causality running from economic growth to electricity consumption for east area of China, while there is a unidirectional causality running from electricity consumption to economic growth for the west area of China. The short-run causality in middle area and whole China are bidirectional. The results indicate the differences of causal relationships between electricity consumption and economic growth in different area of China, which can provide a scientific basis for policy-making of the demand forecasts and investment orientation in the short and long term.