Trade openness and energy consumption in sub-Saharan African countries: A multivariate panel Granger causality test

In this paper, the causal relationship between trade openness and energy consumption in 20 subSaharan African (SSA) countries during the period 1990-2019 is examined. Trade openness is derived from three components, namely total trade, total exports, and total imports, all expressed as a percentage of GDP. In order to account for the omission-of-variable bias, economic growth and urbanisation have been incorporated as intermittent variables between the various components of trade openness and energy consumption. The study first examines the presence of cross-sectional dependence among the countries employed using four cross-sectional dependence tests. Thereafter, both the first-and second-generation unit root tests are used to examine the order of integration. In addition, three panel cointegration tests are used to examine the cointegration among the variables included in the study. Using a multivariate ECM-based panel Granger-causality test, the study found that there is a unidirectional causal flow from trade openness to energy consumption, but only when the exports are used as a proxy for trade openness. When total trade and total imports are used as proxies, no causality is found to exist between trade openness and energy consumption in either direction, irrespective of whether the causality test is conducted in the short run or in the long run. This finding, though contrary to some of the previous studies, is not surprising given the disparity in trade balance and energy challenges facing many SSA countries. (C) 2021 Published by Elsevier Ltd.

Automated summary

This study examines the causal relationship between trade openness and energy consumption in 20 subSaharan African countries during the period 1990-2019. The study found a unidirectional causal flow from trade openness to energy consumption when exports are used as a proxy, but no causality exists when total trade and total imports are used as proxies, in either the short run or the long run. This finding is attributed to the disparities in trade balance and energy challenges facing many SSA countries.