Impact of Electricity Consumption on Ethiopian Economic Growth: An Empirical Analysis

Abstract

Electricity consumption plays a vital role in achieving sustainable economic growth. This study attempts to investigate the impact of electricity consumption on Ethiopian economic growth, time-series data was ranging from 1980 to 2018. The Autoregressive Distributed Lag Model (ARDL) was developed for the data analysis. The results of ARDL revealed that the economic growth was significantly affected by electricity consumption, energy consumption, foreign direct investment, and electricity price both in the long run and short run. While also affected by urbanization and government consumption in the long run. The speed of adjustment revealed that 60.12% of the short-run adjustment is made per year towards long-run equilibrium. Water, mine, and energy office should give important attention to electricity wastage control and integrated monitoring strategies to electricity consumption which are crucial for improving Ethiopian economic growth. The summary of electricity consumption by policymakers and plan designers could bring better improvement on economic growth.