Electricity Consumption and Economic Growth in Jordan: A Multivariate Approach

Abstract

This paper aims to examine the impact of electricity consumption on economic growth in Jordan using annual data over the period 1985-2013. To achieve the goal, an Autoregressive Distributed Lag (ARDL) approach is implemented to estimate a logarithmic form of the traditional production function (Cobb-Douglas), where output is a function of electricity, capital and labour. According to the results of the estimation,the estimated long-run elasticities of output with respect to electrical energy, capital and labor are 0.742, 0.194 and 0.422, respectively; while the short-run estimates are 0.330, 0.086, and 0.343, respectively. Granger-Causality test has shown a positive unidirectional relationship directed from electrical energy consumption towards economic growth supporting the hypothesis.