Abstract:
Electricity consumption in developing countries has been increasing drastically
due to their economic growth in recent decades. Sri Lanka, as a developing
country, is also experiencing an increase in electricity consumption along with a
shortage of energy supply. This study attempts to examines the relationship
between electricity consumption (EC) and economic growth variables such as
gross domestic product (GDP), consumer price index (CPI), and population
density (PD) in Sri Lanka. The Augmented Dickey Fuller (ADF) test was used to
check for stationarity of the variables, and the Johannsen cointegration test and
vector error correction model (VECM) were employed to assess the relationship
between EC and corresponding economic variables (GDP, CPI, and PD) from the
period 1971 to 2019. This empirical study reveals that GDP, CPI and EC are
cointegrated, and there is a long run relationship between EC, CPI, and GDP. Also,
the results of VECM shows that 1% increase in the value of log (GDP) leads to
0.0156 % increase in log (EC), while 1% increase in the value of log (CPI) leads
to 0.1378% increase in log (EC).
