Causality relationship between energy industrial consumption and economic growth: Application on Tunisian country

Following the importance of energy in the agrarian economies, the investigation of the causal relationship between energy consumption in industrial sector and industrial GDP has a fundamental role in implementing adequate policies. This paper aims to study the causal relationship between per capita industrial GDP and per capita energy consumption in Tunisia for the period 1980-2007. The relationship is investigated using aggregated as well as disaggregate categories of energy consumption, including gas, oil and electricity. Using Johansen's cointegration approach and Granger causality, we find that, in both the short and long-run, industrial GDP cause total energy consumption with no feedback. The results indicate also a uni-directional causality running from electricity consumption and gas consumption to industrial GDP in long-run, but the neutrality hypothesis is supported in both short and long-run between oil consumption and industrial GDP. The neutrality hypothesis is supported also between electricity consumption and industrial GDP in the short run. Therefore, conservation policies regarding aggregated and disaggregated energy consumption would harm future industrial performance in Tunisia. Moreover, gas and electrical energy which currently represents a small proportion of total energy consumption will constitute an important input to industrial production growth.