Electricity consumption, industrial production, and entrepreneurship in Singapore

Within the context of a tri-variate vector autoregressive framework that includes entrepreneurship, this paper examines the link between electricity consumption and industrial production in Singapore's manufacturing sector. Unlike the existing studies, this paper focuses on one sector of the economy and utilises a unique monthly dataset. Empirical analysis based on Johansen's cointegration approach shows that the three variables are cointegrated - i.e., a stable long-run relationship exists among electricity consumption, output and entrepreneurship in Singapore's manufacturing sector. Empirical analysis based on data from January 1983 to February 2014 reveals that electricity consumption adjusts very slowly to shocks to industrial production and entrepreneurship. Furthermore, entrepreneurship Granger causes electricity consumption, which causes industrial production. As electricity consumption causes industrial output, the growth hypothesis concerning energy consumption and economic growth holds in Singapore's manufacturing sector and policies that restrict electricity production, without electricity imports, are likely to lead to a decline in the manufacturing output.