IMPACT OF ELECTRICITY CONSUMPTION ON ECONOMIC GROWTH IN NEPAL: AN ARDL BOUNDS TESTING APPROACH

This paper examines the impact of electricity consumption and trade openness on Nepal’s economic growth by using the time series data from past 30 years (1990 to 2019). The study uses the autoregressive distributed lag (ARDL) bounds testing approach of cointegration. All tests including the stationarity, cointegration, and stability of the model were carried out using Stata. The results of bounds test show that there exists a stable long-run cointegration relationship between each of the proxies when economic growth is the dependent variable. The empirical findings also indicate that while electricity consumption per capita and trade openness have both positive impact on economic growth of Nepal in the long run, the electricity consumption is not significant in the short run. The findings can be used to formulate policies that support long-term structural development, mitigate future power constraints, and eventually attain higher levels of sustainable development.