Energy Intensity and Economic Growth in Sub-Saharan Africa: A Dynamic Panel Approach

Abstract

The study examined the impact of energy intensity in sub-Saharan Africa from 1970 to 2019.The study broke sub-Saharan Africa into regional bloc since there may be policy variation across the regional bloc of SSA. A dynamic panel data approach was employed to unravel the relationship between energy intensity and economic growth. The study conducted a panel unit root Test to confirm the stationarity of the series. The results of the unit root showed that the Levinlin and Chu statistics with their corresponding p-values in reference to each variable is smaller than the alpha value at 10%. A post estimation test was also conducted using a dynamic panel approach via the system GMM. The result of the system GMM showed a robust negative correlation between energy intensity and economic growth in SSA and all its regional bloc. The coefficient of energy intensity is highly insignificant which implies that reductions in energy intensity are not linked to higher GDP growth. This is evident from the coefficient of the lag values of energy intensity of one period value of -3.321. The rationale for negative correlation might be connected to common patterns of structural change, paired with rising after tax energy price. The study, therefore recommend that energy conservation should be a focus in SSA as a whole and its regional bloc since this would promote economic growth.