Electricity consumption and income nexus: evidence from Bangladesh

Purpose The purpose of this study is to examine the causal relationship between per capita electricity consumption (PCEC) and per capita gross national income (GNI) (PCGNI) in Bangladesh for the period of 1971-2014. Design/methodology/approach Vector error correction modeling approach. Findings The study reveals that positive short-run unidirectional causal flow running between PCEC to PCGNI without feedback which implies that an increase in electricity consumption promptly affects economic activity. The results of both long-run and joint causality yield strong evidence of bidirectional causal relationship between PCEC and per capita real GNI with feedback. Originality/value Therefore, both electricity generation and conservation policy will be effective for Bangladesh economy. So, smooth supply of electricity is necessary to meet the growing electricity demand for consumption; consequently, it will lead to sustain of growth and take it even higher level.