Electricity consumption and economic growth in Rwanda period of study 1995 – 2019

Abstract

Electricity is one of the most basic materials of the national economy, which plays an important role in national production and life. This study investigated the relationship between electricity consumption and economic growth in Rwanda considering annual data from 1995 to 2019 in Rwanda. Knowledge of the relationship between them is of primary importance for policy makers on the purpose of prioritization of electricity policies and its conservation measures. Apart from the relationship between economic growth and electricity consumption, the study also estimated the causality relationship between real economic growth and electricity consumption in Rwanda for the period of from 1995 to 2019, the study considered among other variables that could lead both economic growth and or electricity consumption and are capital , employment, trade openness as percentage of gross domestic product and electricity end user prices for industrial and non-residential customers. Using the methods of co-integration analysis and Granger Causality test to examine the relationship between electricity consumption and economic growth for Rwanda from 1995 to 2019. The investigation results illustrated that real gross domestic Product had a long run as well as short run positive relationship with electricity consumption within the period of from 1995 to 2019 in Rwanda. The study found also a oneway causality relationship from real gross Domestic Product to electricity consumption and it confirm with conservation hypothesis (H3) that economic growth contributes to electricity consumption within that period of from 1995 to 2019 in Rwanda. Therefore, electricity conservation policies together with the establishment of a competitive electricity market may be feasible with little or no detrimental side effects to economic growth.