Original scientific paper
https://doi.org/10.1080/1331677X.2018.1438907
Electricity consumption, economic growth, urbanisation and trade nexus: empirical evidence from Iceland
Faisal Faisal
orcid.org/0000-0003-1818-3418
; Faculty of Economics and Administrative Sciences, Department of Banking and Finance, Near East University, Nicosia, Cyprus; Institute of Business Studies and Leadership, Abdul Wali Khan University, Mardan, Pakistan
Turgut Tursoy
; Faculty of Economics and Administrative Sciences, Department of Banking and Finance, Near East University, Nicosia, Cyprus
Nil Gunsel Resatoglu
; Faculty of Economics and Administrative Sciences, Department of Banking and Finance, Near East University, Nicosia, Cyprus
Niyazi Berk
; Faculty of Economics and Administrative Sciences, Bahcesehir University, Besiktas-Istanbul, Turkey
Abstract
This study empirically investigates the relationship between economic
growth, electricity consumption, trade and urbanisation in Iceland,
covering the period 1965–2013. The A.R.D.L. bounds testing approach
to co-integration is applied to investigate the existence of the long-run
relationship. The causality was investigated among the variables using
Granger causality under the V.E.C.M. framework. The A.R.D.L. bounds
testing approach to co-integration confirms a long-run relationship
between electricity consumption and its regressors. The empirical
estimation indicates the existence of a positive and statistically
significant impact of economic growth, trade and urbanisation on
electricity consumption for Iceland, not only in the long-run, but also
in the short-run. Furthermore, electricity consumption converges
to its long-run position by 45.63% speed of adjustment using the
channels of urbanisation, trade and economic growth. The results of
Granger causality imply the presence of a feedback causal relationship
between urbanisation and electricity consumption in the long-run,
thus validating the feedback hypothesis. However, economic growth
is causing trade, thus validating the growth-led trade hypothesis in
the short-run. Additionally, no causal relationship was found between
electricity usage and economic growth, which confirms the neutrality
hypothesis. Implementing the energy conservation policy will have
no damaging effect on economic growth for Iceland.
Keywords
Electricity consumption; urbanisation; A.R.D.L.; trade
Hrčak ID:
206069
URI
Publication date:
3.12.2018.
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