Determinants of energy demand in African frontier market economies: An empirical investigation

Abstract

Since the turn of the twenty-first century, the economic performance of Africa has been remarkable. We identify the key factors driving energy consumption from seven frontier market economies in Africa. More specifically, the role of economic, financial, and trade integrations are explored as the source of overall energy demand. First, we establish cross-sectional dependence and heterogeneity across countries. Second, the long-run elasticities of energy consumption reflect the key role of stock market indicators, along with industrialisation and trade openness while foreign direct investment (FDI) inflows have a reducing effect. In this respect, the long-run energy elasticities on individual countries show a considerable variation. Finally, the heterogeneous panel non-causality test confirms that the energy consumption has a feedback relationship with stock market indicators and industrialisation. Our findings reflect that the environmental planning should comprise development in financial and trade sectors in boosting economic growth and increasing energy demand for these countries