The endogenous linkages among electricity consumption, Government spending and economic growth in the GCC countries: New insights from GMM panel VAR framework

Abstract

This study employs panel data from the six GCC countries covering the period 1993 to 2002 and applies a GMM panel VAR approach to examine the endogenous relationships among electricity consumption, government spending and economic growth. The results are presented in three key findings. First, a shock to electricity consumption has a positive effect on economic growth. Second, economic growth is positively influenced by a shock to government spending. Third, the analysis shows that the government responds positively to a shock in electricity consumption, a conclusion further supported by Granger causality tests. Finally, we identify a unidirectional causal relationship from government spending to economic growth, and a bidirectional Granger causality between growth and electricity consumption. These findings have important policy implications for GCC countries pursuing sustainable economic development.