Revisiting the Relationship between Electricity Consumption, Capital and Economic Growth: Cointegration and Causality Analysis in Romania

The paper empirically analyzes, in Romania’s case, the cointegration and causality between electricity consumption, capital and economic growth. The data set covers the period 1980-2011. The results show the existence of bidirectional causality between electricity consumption and economic growth and between economic growth and capital use. At the same time, a unidirectional causal relation is also found from capital use to electricity consumption. The main finding suggests that electricity conservation policies may hinder economic growth by reduction in electricity consumption. Moreover, in the opposite direction, from economic growth to electricity consumption, the fluctuations in economic growth may reduce demand for electricity.