Electricity consumption and economic growth in the GCC countries: Panel data analysis

Applying recent advances in panel data analysis, we investigate the relationship between electricity consumption and economic growth in the GCC countries using annual data from 1975 to 2012. Within a framework which takes into consideration dynamics, heterogeneity and cross-sectional dependence in the panel, we show that the results obtained from using the PMGE, demeaned PMG, AMG, MGE and DFE models indicate a long-run equilibrium relationship between electricity consumption and economic growth. In order to determine the appropriate model and decide the preferred estimator, the Hausman test was performed. The PMGE model emerged as the most efficient of the three estimators. Also, the results obtained revealed a bi-directional causality between economic growth and electricity consumption in these countries, which supports the feedback hypothesis. As a result, this implies that if these countries adopt or implement any energy or electricity conservation policies, this may have a negative impact on its economic growth.