Does economic progress and electricity price induce electricity demand: A new appraisal in context of Tunisia

This article discusses the residential electricity (RE) demand in Tunisia as a function of household disposable real Gross Domestic Product (GDP), the price of electricity (PE) and the degree of urbanization (U) spanning the period 1980-2018. To do that, the Autoregressive Distributed Lag (ARDL) bound model and Granger causality test are employed to examine the influencing factors of the changes in RE demand, and to discuss the directions of short and long-run causalities among the variables. The empirical result shows that all variables are integrated of order one, I (1). The Fisher statistics of the Wald test confirms that variables are cointegrated. Long-run elasticities suggest that, in the long-run, electricity price and urbanization have a significant and positive impact on RE demand, while real GDP contributes insignificantly to the decrease of RE demand in Tunisia. Granger causality empirics suggests that in short run, there is bidirectional causality between RE demand and electricity price, and between RE demand and urbanization, and a unidirectional causality from real GDP and urbanization to electricity price, and from real GDP to urbanization.

Automated summary

This article explores the relationship between residential electricity demand and household disposable real GDP, electricity price, and urbanization in Tunisia. The study finds that in the long-run, electricity price and urbanization have a significant and positive impact on residential electricity demand, while real GDP does not have a significant effect. In the short-run, there is bidirectional causality between residential electricity demand and electricity price, as well as between residential electricity demand and urbanization.