Disaggregate Energy Consumption Versus Economic Growth in Tunisia: Cointegration and Structural Break Analysis

This study investigates the causality between energy consumption and gross domestic product (GDP) in Tunisia for the period 1980-2012. The main contribution of the paper is to investigate empirically the relation of economic growth and energy consumption at both the aggregated and disaggregated levels regarding oil, natural gas, and electricity. We applied the unit root test and the cointegration approach in the presence of structural breaks. Using a vector error correction model specification, our results confirmed the existence of cointegration between the series (except for the case of electricity). The short-run dynamics of the interested variables are tested, indicating that there exists Granger causality running from oil consumption to GDP, but no Granger causality exists running in any direction between gas and GDP and between aggregate energy consumption and GDP. In the long run, our results imply that disaggregated energy consumption causes GDP and that there is a bidirectional causal relationship between aggregated energy consumption and GDP. On the other hand, GDP causes electricity consumption, using a VAR specification. Consequently, policy makers in Tunisia should give priority to the reconstruction of infrastructure development of the aggregated and disaggregated energy consumption as this would force the sustainable economic growth in Tunisia.