Agricultural and Manufacturing Sector Determinants of Electricity Consumption, Price, and Real GDP from Pakistan

Abstract: For the upcoming years, Pakistan’s electricity consumption forecasts estimated to exceed electricity generation capacities. In this study we explore the causal relationship between electricity consumption (EC), electricity price (EP), and real GDP at the various sectors, and general level from the period 1970 – 2018 in Pakistan, by using Johansen Co-integration test and Vector Error Correction Model (VECM). The following determinants selected, such as EC, EP, GDP, other electricity consumption (OEC), and urbanization population growth (UPG) from agricultural and manufacturing sectors. The outcomes indicate that there is a constant long-run relationship exist in agricultural and manufacturing sector. While short-run causality also supports the hypothesis in both sectors. These results support the hypothesis and indicate that electricity consumption, price, and economic growth in Pakistan spurs, but not the other way around. Moreover, the research findings could be beneficial for policymakers, as well as electricity management to strengthen the long-lasting economic policies.

Keywords: Electricity determinants, Economic growth, Urbanization, VECM, Pakistan