EXAMINING THE RELATIONSHIP BETWEEN ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH OF GHANA

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ABSTRACT

Economic growth is an important indicator of a society‟s wellbeing and its ability to sustain it over a period. It enables a rise in living standards and a greater consumption of goods and services. It is underpinned by a rise in real gross domestic product (GDP). Energy is a key component of the modern society and is used heavily in the production of output. Ghana has seen mixed results in its yearly economic growth since independence. It has also suffered various challenges in electricity production. This study aims to examine the connection between electricity consumption and the economic growth of Ghana using a bivariate approach and relying on the ARDL Bounds Testing method. The results points to cointegration between electricity consumption and economic growth where the conservation hypothesis is upheld in the case of Ghana. It is established by this study that a uni-directional causality runs from economic growth to electricity consumption but not the other way round. Based on this finding, policies that lead to the conservation of electricity does not adversely impact economic growth of the nation. It is thus recommended that Ghana implements policies which may lead to the efficient use of energy to safeguard the environment and also lead to sustainability of power generation.

CHAPTER ONE

            Research Background

Since Ghana gained independence in 1957 and became a sovereign nation, achieving economic growth and development has always remained a priority and a key goal or agenda for her leaders. The goal of the National Development Planning Commission (2017) clearly captures sustained and accelerated growth as the path to sustaining Ghana‟s middle-income country status in the Medium Term Expenditure Framework for 2018 – 2021.

Development partners and countries from all over the world are also very interested in the plight of mankind in the least developed or third world countries of which Ghana forms part (Hulme, 2009).

According to the “Background of the Sustainable Development Goals” on United Nations Development Programme (UNDP) website, to ensure measurable objectives and tangible goals, spearheaded by the United Nations, 189 countries adopted a system of measurement called the Millennium Development Goals which had a lifespan up to 2015 and consisted of 8 clear goals These goals metamorphosed into the 17 Sustainable Development Goals (SDGs) with an expiry of 2030 aiming to present a group of universally-agreed measures that addresses the pressing political, environmental, and economic problems facing our world.

Economic development is quite a complicated outcome to measure as captured by the numerous measures contained in the SDGs however one key criteria being pursued is the alleviation of poverty. Economic development must embrace more than the physical and monetary side of people‟s livelihood, to expand to human liberties (Todaro & Smith, 2015). Even though economic growth does not guarantee economic development (Jales, 2017), it is asserted that economic growth must be pursued to boost economic development. Economic growth is

perceived as a very critical ingredient and only viable solution to the reduction of endemic poverty in the developing world (Spratt, 2008).

It is thus no wonder that this singular objective of ensuring rapid and continuous economic growth holds so much importance to the people of Ghana that it has been the basis for regime changes i.e. from civilian to military rule and vice-versa (Darko, 2015). Since multi-party democracy was adopted in 1992, the subject of economic growth and development has been one of the most important topics on which political parties have campaigned and sought to be elected into office.