Electricity consumption–growth nexus: The case of Malaysia

The goal of this paper is to model the relationship between electricity consumption and real gross domestic product (GDP) for Malaysia in a bivariate and multivariate framework. We use time series data for the period 1971–2003 and apply the bounds testing approach to search for a long-run relationship. Our results reveal that electricity consumption, real GDP and price share a long-run relationship. The results of the autoregressive distributed lag (ARDL) estimates of long-run elasticity of electricity consumption on GDP are found to be around 0.7 and statistically significant. Finally, in the short-run, the results of the causality test show that there is a unidirectional causal flow from electricity consumption to economic growth in Malaysia. From these findings we conclude that Malaysia is an energy-dependent country, leading us to draw some policy implications. This paper adds support and validity, thus reducing the policy makers concern on the ambiguity of the electricity and growth nexus in Malaysia.