Production function with electricity consumption and policy implications in Portugal. (November 2017)

• Record Type: Journal Article
• Authors: Shahbaz, Muhammad; Benkraiem, Ramzi; Miloudi, Anthony; Lahiani, Amine
• Is Part Of: Energy policy. Volume 110(2017)
• Page Start: 588
• Page End: 599
• Publication Date: 2017-11
• Subjects: D24 -- B23; Production function -- Asymmetries -- Portugal; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2017.08.056
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: Using a sample of quarterly data, we investigate the effect of electricity consumption, capital formation and financial development on economic growth in Portugal. A positive (negative) shock of electricity consumption is estimated to have increased (decreased) economic growth. Economic growth is positively affected by positive shock stems in capital. A positive (negative) shock in financial development declines (increases) economic growth. These findings reveal that (a) Portugal is still an energy-dependent economy; (b) energy is one of the major inputs for economic growth and development; (c) a conservation energy policy should not be implemented because energy is an important driver of growth; (d) economic growth enhances capital formation and not the opposite. Hence, it appears more relevant to boost economic growth before enhancing capital formation; (e) financial development does not appear to be an important catalyst for economic growth. Findings also highlight (f) the relevance of the recent energy policy implemented in Portugal and (g) the need to limit energy imports by means of producing electricity through renewable energy to reduce the external debt level in Portugal, especially after the 2008 crisis. Highlights: Asymmetric effect of electricity consumption on economic growth in Portugal. A nonlinear cointegration approach on quarterly data over the period 1960–2015. Electricity consumption is one of the major inputs for economic growth in Portugal. A conservation energy policy should not be implemented for the Portuguese economy. Recent energy initiatives implemented in Portugal are relevant.