The Dynamic Causal Relationship between Electricity Consumption and Economic Growth in Ghana: A Trivariate Causality Model

This paper examines the dynamic causal relationship between electricity consumption and economic growth in Ghana within a trivariate ARDL framework, for the period 1971–2012.The paper obviates the variable omission bias, and the use of cross-sectional techniques that characterise most existing studies. The results show that there is a distinct causal flow from economic growth to electricity consumption: both in the short run and in the long run. This finding supports the growth-led electricity consumption hypothesis, as documented in the literature. The paper urges policymakers in Ghana to resort to alternative sources of electric power generation, in order to reduce any future pressures on the current sources of electricity production. Appropriate monetary policies must also be put in place, in order to accommodate potential inflation hikes stemming from excessive demands for electricity in the near future.