The Relationship between Economic Growth and Energy Consumption Disaggregated by Sector: The Case of Morocco

Abstract

The type of relationship that can link energy with economic growth plays a major role in determining the macroeconomic policy of a country. Therefore, several studies have been carried out to derive econometric models to link energy consumption with gross domestic product (GDP). However, in these studies the energy consumption has been used in its global term, while this consumption includes all the economic sectors that use energy (residential, industry, transport, agriculture). Therefore, the objective of this work is to examine this relationship between the gross domestic product (GDP) and energy consumption but disaggregated by sector (residential, transport and industrial). And to validate our model we have taken the case of Morocco during the period 1997-2019, in order to draw the impact of each sector on economic growth. In order to test this causality, a Vector Error Correction Model (VECM) is applied instead of a Vector Autoregressive Model (VAR), using the Johansen cointegration technique. The results obtained showed that in the long run energy consumption by the transportation and residential sectors has a positive impact on GDP, while that of households has a negative impact.

Keywords

• Energy consumption; Economic growth; Sector; Vector Error Correction Model (VECM); Cointegration; Johansen causality