An Econometric Study of Economic Growth, Energy and Exports in Mauritius: Implications for Trade and Climate Policy

• Main Author: Riad Sultan
• Format: Article
• Language: English
• Published: EconJournals 2012-01-01
• Series: International Journal of Energy Economics and Policy
• Subjects: Growth; Exports; Electricity; Granger causality; Climate policy
• Online Access: http://econjournals.com/index.php/ijeep/article/view/254/151

While electricity from fossil fuels is among a major source of greenhouse gases and global warming, it is also a key resource in the industrial sector geared towards exports and economic growth. This study attempts to examine the export-GDP nexus and electricity-GDP nexus in addition to a supplementary hypothesis between exports and electricity in Mauritius for the period of 1970-2009. An augmented neo-classical aggregate production model is used. The ARDL bounds test and the Johansen cointegration test confirm the existence of a long-run relationship between these variables. The multivariate Granger-causality analysis indicates that electricity and exports Granger-cause economic growth in the long-run. Electricity remains a significant causal variable in the short-run and is also found to lead exports. The empirical findings suggest that conserving electricity as a climate policy may not be conducive for exports and economic growth. The use of renewable sources for electricity may be the right option.