Title: Modelling the causal linkages among residential electricity consumption, gross domestic product, price of electricity, price of electric appliances, population and foreign direct investment in Malaysia

Authors: Lee Lian Ivy-Yap; Hussain Ali Bekhet

Addresses: Graduate Business School, Universiti Tenaga Nasional, 43000 Kajang-Selangor, Malaysia ' Graduate Business School, Universiti Tenaga Nasional, 43000 Kajang-Selangor, Malaysia

Abstract: Residential electricity consumption in Malaysia is increasing rapidly and effective measures are urgently needed to contain its rapid growth to achieve better energy security. The current paper attempts to investigate the multivariate Granger causalities and dynamic responses of residential electricity consumption in Malaysia for the 1978-2013 period. In the long run, all the determinants of residential electricity consumption (real disposable income, price of electricity, price of electric appliances, population and foreign direct investment) Granger cause it but in the short run, only the price of electric appliances and population do so. The response of residential electricity consumption to shocks alternates between positive and negative but diminishes with time. In addition to own shocks, shocks to the price of electricity contribute most of the variance in residential electricity consumption. The study shows that pricing policies are effective in reducing residential electricity consumption. As fossil fuels are finite, careful planning of energy consumption is necessary to safeguard energy security.

Keywords: residential electricity consumption; REC; co-integration; multivariate Granger causalities; dynamic response; Malaysia; modelling; GDP; gross domestic product; electricity prices; electric appliances; population; foreign direct investment; FDI; disposable income; energy security.

DOI: 10.1504/IJETP.2016.074491

International Journal of Energy Technology and Policy, 2016 Vol.12 No.1, pp.41 - 59

Received: 19 May 2015
Accepted: 17 Aug 2015
Published online: 01 Feb 2016 *

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