Electricity Consumption,Financial Development And Economic Growth

This paper aims to review the interaction between electricity consumption and economic growth at the aggregate level within the period of 1990 to 2014 for the Bolivian economy,a developing country.Then an augmented production function it’s applied;as well,its proposed that financial development is an important driver of electricity consumption,then indirectly of economic growth.For the purpose of the Econometric analysis,the unit root test,VECM Granger causality and combined cointegration framework are applied,considering the successful and notable works of Roubaud and Shabaz(2018)for the theoretical structure;Huarachi(2016)and López(2016)as a start point,as their work are the first and few empirical studies about the energy consumption-economic development nexus,and financial development and economic growth association,respectively.However,to complete this triangle of interaction seems fair to understand then what is the interaction between financial development and electricity consumption.The estimated results confirm the growth hypothesis,when talking about energy consumption to economic growth.Estimation results suggest that at the aggregate level an increase in the energy consumption will affect on 0.034%on the GDP,estimator proxied by the energy consumption per-capita;meanwhile the relationship between financial development to economic growth seems to have a negative effect within the short term,showing a 0.082%in reduction for each unit of increase,the private credit indicator is the variable considered for this estimation.But a positive impact is foreseen for the long run.Such results confirm some of the previous studies in developing countries(Barreto and Campo,2012)where the financial impact is not necessarily positive in the short term.This study connects the researches of precursors authors regarding the Bolivian case by making a relevant contribution as showing the correlation from financial development to consumption of energy;and from economic growth to financial development as a unveil a robust causality among these variables.