Energy Policy 156 (2021) 112420

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Energy Policy
journal homepage: www.elsevier.com/locate/enpol

Nexus between household energy consumption and economic growth in

Bangladesh (1975–2018)
Guoxing Zhang a, b, Md Nuruzzaman a, *, Bin Su c, d
a
School of Management, Lanzhou University, Lanzhou, Gansu, 730000, PR China
b
Institute of Green Finance, Lanzhou University, Lanzhou, Gansu, 730000, PR China
c
Energy Studies Institute, National University Singapore, Singapore
d
Department of Industrial Systems Engineering and Management, National University of Singapore, Singapore

A R T I C L E I N F O A B S T R A C T

Keywords: Bangladesh, a climate-vulnerable country, has taken initiatives to reduce greenhouse gas emissions. The coun­
Bangladesh try’s most significant challenge to achieving that goal is keeping economic growth even after ensuring com­
Economic growth mercial and residential energy for its people, primarily dependent on fossil fuel. This research investigates the
Household electricity consumption
residential electricity and gas consumption and its effect on Bangladesh’s economic growth with the data period
Household gas consumption
Nexus
1975–2018. Household energy consumption is one of the critical factors for sustainable economic growth,
although it is not directly converted to the country’s manufacturing output. Autoregressive Distributed Lag
(ARDL) bound testing approach has been used due to the robust and better performance in this study with the
smaller size of the sample. The country’s labor-intensive economy has been found with a unidirectional rela­
tionship from household electricity consumption and population growth, which stresses the significance of
ensuring electricity for all. Therefore, the country cannot take the energy conservation policy right now as it
could obstruct its growth. However, energy sources might be replaced with renewable energies to meet the
country’s residential energy demand.

1. Introduction
Global concerns for energy consumption and economic growth nexus
have raised and reflected in numerous research work for the last couple
of decades, aiming to find balance and solution to adequate energy for
all. IEA has reported that around 21% of the world’s total energy con­
sumption goes to the residential sector in 2017 (IEA, 2019). There is a
significant disparity of this energy consumption between the country
groups like developed and developing economies. Industrial countries
convert their commercial energy consumption directly to goods and
services and add direct economic values. With added economic outputs,
they can ensure improved access to residential energy consumption,
leading to a better quality of life and further economic growth. For
instance, European nations have widely used household appliances with
improved energy efficiency. Residential cooling, heating, cooking, and
lighting have experienced benefits of energy-efficient policies (Labanca
et al., 2013). However, non-industrial or developing countries have
fewer opportunities for that. Access to their household energy con­
sumption is often a question of priority over commercial energy.
Excessive dependence on fossil fuel for industrial and residential energy
consumption in these countries could highly likely foster the risks and
vulnerabilities of economic pressure and keep the energy issues unse­
cured in the long term. There is moderately a smaller number of
empirical investigations have been done regarding the economic
development and household energy consumption in developing nations
like Bangladesh, which are heavily dependent on conventional energy
sources (Islam et al., 2014a, 2014b) and adjust their policies less
frequently (Gulagi, 2020). Energy policies should expand economic in­
terests while diminishing the environmental footprints, as suggested by
Song et al. (2019).
Bangladesh was chosen for this study because of some reasons. The
energy sector is known as poorly managed in this country (Ahmed,
2011). To ensure sustainable economic growth, it needs to overcome the
obstacle of this issue because it is generally believed that economic
growth is highly dependent on energy. The government has taken its
Five-Year Plan (2016–2020) to accomplish the goals of ensuring “access
to affordable, reliable, sustainable and modern energy for all” keeping
average GDP growth at least 7%, which will also reflect in the next

* Corresponding author.
E-mail addresses: guoxingzh@lzu.edu.cn (G. Zhang), nuruzzaman15@lzu.edu.cn (M. Nuruzzaman), subin@nus.edu.sg (B. Su).

https://doi.org/10.1016/j.enpol.2021.112420
Received 16 December 2020; Received in revised form 10 May 2021; Accepted 9 June 2021
Available online 23 June 2021
0301-4215/© 2021 Elsevier Ltd. All rights reserved.
G. Zhang et al.
Five-Year Plan (2021–2025). The massive target of growth will require
to meet the gap of energy demand and supply; otherwise, their target
should be compromised. Although Bangladesh is known as one of the
most climate-vulnerable countries (Huq et al., 2019), energy production
from renewable sources is not adequate. Bangladesh’s contribution to
global emission is known to be insignificant; however, modern energy
demands renewable energy for a sustainable future (Xu, 2019). The
economic development of Bangladesh is asymmetric, especially the
encircled capital city Dhaka and Chittagong. Urbanization and social
amenities are also indiscriminately focused on those two cities. The
country’s manufacturing growth has been improved in recent years,
which takes energy consumption; however, the manufacturing sector’s
energy consumption does not give a clear picture of the country’s total
economic growth. As Narayan and Doytch (2017) have found in a
large-scale study that low and lower-middle-income countries show
economic development with the residential energy consumption, it is
highly recommended that both public and private sector should come
forward to ensure the availability of household energy. It is also sug­
gested not to use any energy residential energy conservation policy.
Little resources and colossal population density have made the policy­
makers ignoring household energy consumption a priority. This under­
studied field of Bangladesh’s household energy consumption needs to be
enriched to have better insights for policymakers.
Bangladesh’s economy is energy-driven. Most economic activities
are primarily dependent on electricity consumption. From the period of
independence, it has suffered much with the poor electricity infra­
structure. The current arrangement is yet to reach all the country’s
people (Ahmed et al., 2013). Several government projects have been
taken in the last years, which has improved the scenarios. Among the
electricity and gas consumption sectors, industry and household sectors
are the most significant sector, then commercial and agriculture sectors.
The country’s current capacity is 22,562 MW until the end of 2019
(BPDB, 2019). Natural gas is also a blessed natural resource in
Bangladesh. The EIA report says the country is the eighth largest natural
gas producer in the Asian region (EIA, 2019). However, only 56% of the
domestic gas demand can be met with the natural gas produced here.
The new household gas connection has been adjourned for several years,
Fig. 1. Comparison of residential electricity and gas consumption with the GDP of Bangladesh and other neighboring countries (IEA, WB-WDI).
2
Energy Policy 156 (2021) 112420
and the new industrial gas connections were stopped in 2009, which has
been restarted in the second quarter of 2012. Fig. 1 shows the
comparative electricity consumption scenario of Bangladesh and other
countries.
Nonetheless, Bangladesh’s energy sectors face several problems like
extreme system loss, and the infrastructure cannot respond quickly
when in need of new power plants. This causes a big gap between energy
supply and demands. The traditional operation method has made the
electricity plants less effective, and authorities cannot get the plants’
maximum outputs. The inefficiency of electricity production and dis­
tribution leads to an erratic supply of electricity. Mozumder and Mar­
athe (2007) have also mentioned the authorities’ poor management
responsible for the energy sectors. Lack of morality led to energy stealing
or theft applicable for both electricity and gas in industry and household
sectors. The government institutions responsible for the energy sectors
are also facing problems of not having enough funds. As the economy is
shifting to more energy-led industries like readymade garments, it is
expected that the industry might face difficulties with energy.
Manufacturing sectors are still highly reliable on electricity consump­
tion as a source of fuel in this country. More than 30% of the country’s
natural gas consumption also goes to household activities, mostly
cooking food. Although some studies have been done so far about the
economy, energy, and environment, it requires a depth understanding of
the whole scenario (Islam and Shahbaz, 2012). There is no research done
so far in authors’ knowledge that discusses the household electricity and
gas consumption and their relation with Bangladesh’s economic growth.
However, among all the problems in the energy sectors, Bangladesh
is moving upwards in recent years, being one of the top-ten fastest-
growing economies globally and expecting to be a high-income country
by the year 2041. GDP per capita for the country is $1698 in 2018, while
India and Pakistan, as neighboring countries, had $2009 and $1482 at
the same time (WDI). The country is enhancing its energy generation
capacity; 3493 MW electricity was added with a small portion of the
power supply imported from India. Table 1 shows the comparison of per
capita household electricity consumption and GDP. In order to mitigate
the problems of the gap between electricity supply and demands, the
country is working with 50 new power plants with a target to add
G. Zhang et al.
Table 1
Household electricity consumption and GDP per capita in Bangladesh,
1975–2018. (source: IEA, WDI).
Time Average household electricity Average GDP per capita
Periods consumption per capita (kWh) (current US$)
1975–1984 3.41 204.1
1985–1994 13.14 282.9
1995–2004 44.40 428.0
2005–2018 95.30 995.7
15,151 MW of electricity production, which are expected to be finished
in the next couple of years following its seventh “Five Year Plan – Power
System Master Plan, 2016” (BPDB, 2019). Besides the traditional source
of electricity production, it is also focusing on producing energy from
renewable sources and nuclear plants. The contribution of renewable
energy to the total energy contribution was 10% by 2020, as the target
set with the Renewable Energy Policy, 2008. Despite the slow growth of
this particular source, authorities are trying to improve the electricity to
2,896 MW by 2021. A country’s energy infrastructure strongly in­
fluences its energy consumption pattern, which ultimately leads to
economic growth. Nonetheless, the existing economic situation also
defines how the country’s energy production and distribution will be,
and Bangladesh is an excellent example of this statement.
There is ample research work done in energy consumption, economic
growth, carbon emission, etc., based on the correlation, causality, and
cointegration (Bhattacharya et al., 2016; Arouri et al., 2012; Wang et al.,
2011; Ozturk et al., 2010). Being a low-income country with a massive
population, Bangladesh never had the luxury of choosing an environ­
mentally sound energy sector. The country has always been struggling to
meet the domestic demands of electricity and gas. The country could not
risk its economic growth because it is still struggling to come out from
the group of low-income countries. Academicians have tried to shed
some light on the country’s economic growth; the field is still considered
understudied. With this research paper, there will be an attempt to find
some questions to fill the literature gaps, like:
i. Is residential electricity and gas consumption directly influence
economic growth?
ii. Finding possible long and short-run dynamics of household en­
ergy consumption and economic growth in Bangladesh.
iii. If there is any influence on economic growth, to what degree and
direction?
iv. According to the relation between household electricity and gas
consumption and economic growth, what type of energy policy is
suggested for Bangladesh?
This study contributes to the literature with (a) causal relationships,
and short and long-run dynamics of the variables of household energy
consumption and the economic growth of Bangladesh with the data of
1975–2018 with ARDL bound testing and Granger causality, that will
provide the insights regarding policy implications, (b) economy and
population data are used in growth form which will give the data
movement direction from previous period data to the current period, (c)
unlike previous studies related to Bangladesh, household gas con­
sumption is included in the study to find out the entire scenario, (d)
population growth in the study will provide the policy implications a
better understanding with the magnitude of the mutual effect of the
economy and household energy usage over time, (e) most recent data
are used in this study based on availability.
The rest of the paper is organized as follows. Section 2 describes the
related literary works. Section 3 explains the data and methodology
where test results and discussions are given in Section 4. Finally, Section
5 discusses conclusion and policy implementations.
3
Energy Policy 156 (2021) 112420
2. Literature review
2.1. Energy consumption – economic growth relation in high income
countries
Research outcome from the developed countries is primarily mixed.
There is some evidence that energy consumption is caused by economic
growth. These countries are often suggested to go with energy conser­
vation or switching policies. Cai, Sam and Chang (2018) have taken G7
countries as the sample to find out the relation between economic
growth, clean energy consumption and carbon emissions. The study
revealed no cointegration among variables in the UK, France, the US,
Italy and Canada. According to the study, for Germany, the US and
Canada, their economy is caused by clean energy consumption. The
authors have suggested that clean energy usage with energy-saving
technology will be beneficial to fill the gaps of economic growth and
environmental protection. Taking 35 OECD countries as the sample,
Ozcan et al. (2020) have used the GMM approach with the data period of
2000–2014. The authors have found that the environmental policies are
starting to align with the economic performance and energy consump­
tion in the developed economies. Pala (2020) has taken the G20 coun­
tries as the sample, taking data from 1990 to 2016. The author has used
FMOLS, DOLS method to investigate long-term relationship. Granger
causality and VECM results have found that in the G20 countries, a
two-way relationship exists between economic growth and energy
consumption. The author has suggested careful energy conservation
policies to not disrupt the economic progress there.
2.2. Energy consumption – economic growth relation in developing
countries
Developing economies have also been subject to study in many lit­
erary works. These usually show that growth is usually dependent on
energy consumption. It is often suggested that no energy conservation
policy should be taken there. Implementing the Johansen-Juselius test
with the China data from 1980 to 2004, Yuan et al. (2008) have inves­
tigated the relationship between energy consumption and the country’s
economic growth. Their outcomes suggest that there exists two-way
directional nexus between the two variables. Chandio et al. (2019)
took Pakistan as a sample and investigated the electricity consumption
and economic growth data from 1972 to 2017 and found that household
electricity and gas consumption positively affect the country’s economic
growth. Using data of 1978–2016 and applying the ARDL approach,
long-run nexus was found by Saudi et al. (2019) with the study of
Malaysia. The study confirms that environmental degradation is also
caused by energy consumption. Kyophilavong et al. (2015) have done an
experiment with the Thailand data using the Bayer and Hanck cointe­
gration approach. The study has suggested that Thailand’s economic
growth is stimulated by energy consumption. Their Granger causality
result shows that consumption of energy causes the country’s economic
growth. Hsiao’s version of Granger causality has been applied in Aqeel
and Butt (2001) research with the data period of 1956–1996 and found
that the country’s economic growth is caused by electricity consumption
in Pakistan. Using a multivariate framework, Narayan and Singh (2007)
have investigated the GDP and electricity consumption nexus in the Fiji
Islands, which has also become very popular. The authors have inves­
tigated with the data from 1971 to 2002 and found evidence with bound
testing approach that the country’s economic growth has a one-way
causal relationship from the electricity consumption, and the authors
have suggested using no energy conservation policy that might cause an
adverse effect on the economic growth. Another panel of 19 Sub Saharan
African countries was selected with the studies of Al-Mulali and Che Sab
(2012) in order to investigate the relationship among the energy con­
sumption, CO2 emission and economic growth with the data from 1980
to 2008 and their empirical finding suggests that the selected country’s
economic growth show strong relation with the energy consumption and
G. Zhang et al.
with the cost of increased carbon emissions as well.
Some studies also show mixed results or less dependence on energy
consumption, even for developing economies that favor energy conser­
vation policy. Chen, Kuo and Chen (2007) have investigated the relation
of electricity consumption and the economic growth data of 10 devel­
oping Asian countries from 1971 to 2001 using time series and panel
data analysis and the authors have found mixed results of having some
unidirectional and some bidirectional causality between the variables
where they have used the error correction and causality test approach.
The authors have suggested energy-saving policies for those countries
with the investigation. Another bootstrap model implication was
observed with Rufael’s (2014) study, where the authors have selected 15
developing countries as a sample, and the data used in the research work
was from 1975 to 2010. However, the author has found a strong causal
relationship from electricity consumption to economic growth for
Belarus and Bulgaria. A common characteristic of almost all developing
countries is that these economies are likely dependent on energy con­
sumption. Lack of necessary resources might challenge them to imple­
ment renewable energies as a replacement.
2.3. Energy consumption mix in Bangladesh
Bangladesh was included in some previous studies, which shows that
this country is still highly dependent on energy consumption to maintain
the economy. Das, Chowdhury and Khan (2012) took three regions, 45
countries to investigate with the data range of 1971–2009 and found a
positive relationship between electricity consumption and economic
growth. The authors have used the system GMM approach in their work.
Alam et al. took (2012) took Bangladesh as a sample and used the
bi-variate cointegration model and Granger causality approach and
found empirical evidence that electricity consumption has a positive
impact on the country’s economy in both the long and short run. The
authors have suggested that electricity consumption also comes with
environmental pollution in the long run. Masuduzzaman (2012) took the
electricity consumption and GDP data of Bangladesh from 1981 to 2011
and found the electricity consumption and investment causes economic
growth positively in the long run. Das, McFarlane and Chowdhury
(2013) had studied the natural gas consumption of Bangladesh with data
from 1980 to 2010 and found that the economic growth causes the usage
of natural gas; no other causal direction was found in the outcome.
Authors have used error correction and the granger causality approach.
Imran and Siddiqi (2010) took India, Bangladesh, and Pakistan to
investigate three SAARC countries to investigate with the panel-based
error correction model and found a long-run relationship between en­
ergy consumption and economic growth. A summary of related litera­
ture of Bangladesh is presented in Table 2.
General consideration of energy consumption in previous studies is
based on total energy consumption. Nevertheless, the pattern of these
consumption changes from developed countries to developing countries.
Electricity consumption is subjected to regional variances, income, ur­
banizations, and supply risks (Karnfil and Li, 2015). Industrial energy
consumption usually yields products and services. However, to what
extent the residential energy consumption and economic growth are
related is unknown. A research gap still exists whether industrial and
household electricity and gas consumption show different relationships
Table 2
Literature review on Bangladesh’s energy consumption and economic grwoth.
Authors Methodology Study Period Findings
Imran and Siddiqi (2010) ECM 1971–2008 EC > EG
Das et al. (2012) GMM 1971–2009 EC > EG
Alam et al. (2012) ARDL, VECM 1972–2006 EC > EG
Masuduzzaman (2012) Granger causality 1981–2011 EC > EG;
EC > Invst > EG
Das et al. (2013) Granger casuality 1980–2010 EG > Gas
4
Energy Policy 156 (2021) 112420
with the economic growth in developed and developing countries.
Pablo-Romero et al. (2017) have suggested that South Asian countries
should make the most significant effort to minimize residential energy
consumption and other regions. However, previous studies from
Bangladesh show that energy consumption is crucial for development.
Comprehension of household energy consumption, whether to be sub­
jected to the conservation policy is missing. Balancing with the vast
population and the limited resources in Bangladesh to produce energy, it
has to prioritize between increased industrial and residential electricity
demands to meet economic growth and follow the Paris Agreement to
minimize emissions. The current research paper will fill this gap with
Bangladesh’s addition in literature, taking ARDL bound testing
approach, long-run and short-run dynamics, and the Granger causality
approach.
3. Data and methodology
To discover the insights about the relation of Bangladesh’s household
electricity and gas consumption with economic growth, this study will
use yearly time series data of Bangladesh from 1975 to 2018. As
Bangladesh was just got independence in 1971, we selected the timespan
from four years later as the country’s infrastructure was broken due to
the war. World Development Indicators (WDI), International Energy
Agency (IEA) dataset has been accessed for this study (World Bank,
2019; IEA, 2020). As an indicator of economic growth, GDP per capita
(GDPPC) is used here as the dependent variable is taken from the WDI
database, and the value is measured with current US dollars. Other
explanatory variables are household electricity consumption (HHELEC),
which is measured in Gwh and collected and adapted from the IEA
database, household gas consumption (HHGAS) as million cft is taken
from the IEA database, and the population growth (POPGR) is collected
form WDI database and measured in percentage. To avoid biasness, all
data are transformed into natural logarithms.
3.1. Model specification
The study will take a similar multivariate regression model of
Chandio et al. (2019) to analyze the short-run and long-run relationship
between household electricity and gas consumption, economic growth,
and population growth in Bangladesh with time-series data. The basic
model that will be used here is given below:
GDPPCt = f (HHELECt, HHGASt, POPGRt ) (1)
The econometric form of the above equation is:
GDPPCt = α + β1 HHELECt + β2 HHGASt + β3 POPGRt + εt (2)
After applying natural logarithms to equation (2), the extracted log-
liner model would be specified as below:
LnGDPPCt = α + β1 LnHHELECt + β2 LnHHGASt + β3 LnPOPGRt + εt (3)
Here, α is the constant intercept, β1- β3 are the coefficients of
explanatory variables to be estimated, t is the time dimension and
LnGDPPC, LnHHELEC, LnHHGAS, LnPOPGR are the natural logarithm of
the variables. Ɛt denotes the error term in the model.
3.2. Unit root testing
Before approaching the model, it is needed to ensure the unit root
testing or the stationarity test as Pesaran and Shin (1998) have sug­
gested about the conditions of the variables; they should be I(2) or order
2 before proceeding with the ARDL bound test. In econometrics, there
are several unit root testing methods; some are suitable for time series
analysis, some are for panel data. For the current study with compara­
tively smaller time series data, this study will use
Augmented-Dicky-Fuller (ADF), Kwiatkowski-Phillips-Schmidt-Shin
G. Zhang et al. Energy Policy 156 (2021) 112420

(KPSS) and Zivot-Andrews (Z&A) unit root test. ADF unit root test can be
used in the presence of serial correlation. This powerful approach is
superior to the traditional Dicky-Fuller test. KPSS is the unit root test
which is useful given the deterministic trends of the data series. Due to
various direct or indirect shocks to the variables, sometimes there are
breaks of the data, Z&A unit root test finds the breaks. The above unit
root tests are well-known and used in many research works and found in
popular econometrics software packages. The tests will use mainly the
null hypothesis of the variables of having unit root against the null hy­
pothesis of having no unit root both in their level and first difference.
3.3. Cointegration testing with ARDL bound test
This study will select the ARDL bound approach to determine the
cointegration among the variables among several cointegration ap­
proaches. Pesaran and Shin (1998, 2001) have developed this approach,
which estimates the relationships among the variables by choosing the
appropriate lag order first and then proceeding with the OLS. The choice
of taking the approach is motivated for some reasons like (a) the sample
size in this research work is not big, so, to avoid biases of sample size,
ARDL approach is better, (b) it works with the mixed order of variables
like I(0) or I(1), sometimes variables are not actually in the same order,
ARDL bound test approach is suitable in this case, (c) this approach can
find both long and short-run nexus among the variables, (d) due to the
adoption of a single equation, it gets easier to explain the relationships
among the variable with this approach, (e) the approach also works
smoothly with the potential problems like the endogeneity, and auto­
correlation problem of the dataset. Applying the ARDL bound testing
approach with equation (3), the following equation (4) will be used for
here succeeding the approach of Chandio et al. (2019):
(Pesaran and Pesaran, 1997), the Cumulative sum of recursive residuals
(CUSUM) and Cumulative sum of recursive residuals of squares
(CUSUMSQ) are to be used for stability check.
4. Empirical findings and discussion
4.1. Findings from unit root tests
As mentioned in the methodology section, the current study has
conducted Augmented Dicky-Fuller (ADF) (Dicky and Fuller, 1981) and
Kwiatkowski-Phillips-Schmidt-Shin (KPSS) (Kwiatkowski et al., 1992)
unit root tests with the variables and the test results are given below in
Table A.1. The results confirm that the variables GDPPC, HHGAS, and
POPGR are stationary after the first difference in the ADF approach,
while HHELEC is stationary in both cases. With Trend and Intercept,
POPGR also shows stationarity both in level and first difference. On the
other hand, KPSS unit root test shows that they are not stationary for
both level and first difference data except POPGR with their Intercept.
The study also conducts the Zivot-Andrews (Z&A) unit root test,
which is more advanced, and Table A.2 reveals the test results, indi­
cating the variables have unit root except for the GDPPC. However, after
the first difference and break years, data are considered as fine.
ADF, KPSS and Z&A unit test results show that some data are I(0) and
some are I(1), but another important thing is that no variable is I(2).
Following the above mixed results from the unit-root testing, the
different data orders are persuaded to go through the ARDL bound test
approach to explore the cointegration.
4.2. ARDL model estimation

p
∑ p
∑ p
∑ p
∑
ΔLnGDPPCt = β0 + γ i ΔLnGDPPCt− 1 + δj ΔLnHHELECt− 1 + ϑl ΔLnHHGASt− 1 + λm ΔLnPOPGRt− 1
i− 1 j− 1 l− 1 m− 1 (4)
+ϕ1 LnGDPPCt− 1 + ϕ2 LnHHELECt− 1 + ϕ3 LnHHGASt− 1 + ϕ4 LnPOPGRt− 1 + εt

As the sample size is not that large due to the constraints of data
availability, Liew (2004) has suggested using Akaike Information Cri­
In the above equation, the null hypothesis H0: ϕ1 = ϕ2 = ϕ3 = ϕ4= terion (AIC) for the finding of optimum lag. Hence, the model used for
0 is describes that there is no cointegration among the variables where the ARDL has selected the (2, 0, 1, 2). So, the optimum lag length for the
the alternative hypothesis H1: ϕ1∕ = ϕ2∕= ϕ3∕ = ϕ4∕=0 says that there are variables are: LnGDPPC = 2, LnHHELEC = 0, LnHHGAS = 1, LnPOPGR
cointegrating relationship among the variables. As the sample is small,
Narayan (2005) has recommended to use critical values table for the
calculation. Following the critical values of lower and upper bounds,
F-statistics would be analyzed. First part of the above equation with γ, δ,
ϑ, λ signsconsider the error correction dynamics and the next part with
ϕ1, ϕ2, ϕ3, ϕ4 nexus in the cointegration. The value of optimum lag will
be determined with the AIC information criteria.

3.4. Diagnostic and stability tests

Working with the ARDL model comes with necessary diagnostic

tests, especially the error term in the model, strengthening the validity
and reliability of the test results. Furthermore, the results ought to be
free from the biases of serial correlation. Therefore, the current study
will investigate the model with the Q-statistics, Breusch-Godfrey Serial
Correlation LM test, and Heteroscedasdicity tests, which will verify the
model’s assumptions.
Furthermore, it is also crucial to assess whether the model is stable or
not with the appropriate stability tests. The dynamic stability feature
should be examined for autoregressive models in econometrics.
Following other research works (Brown et al., 1975) and suggestions Fig. 2. Akaike information criteria.

5
G. Zhang et al. Energy Policy 156 (2021) 112420

= 2 and its shown in Fig. 2. Table 4

Model diagnostic test results.
4.3. Model diagnostic tests Test F-statistics Probability

Breusch-Godfrey Serial Correlation LM test 1.1359 0.2846

As further steps involve working with the model, it needs to check Breusch-Pagan-Godfrey heteroscedascity test 0.6285 0.6248
beforehand if the model is suitable with proper diagnostic tests. From ARCH heteroscedascity test 0.1039 0.5283
the test results given in Table 4, it can be seen that the model is a good fit
with the R-value of 0.9735 (Adj R2: 0.9691), which denotes that about
97% of the variations of variables LnGDPPC are explained with the Table 5
model along with LnHHELEC, LnHHGAS, and LnPOPGR. The Durbin- Long-run estimation results.
Watson stat value is 1.52, which means the model is legitimate. More­ Variables Coefficient t-stat. Prob.
over, the calculated F-statistics = 473.6483 (p = 0.0000) signifies that it
LnHHELEC 0.147*** 1.284 0.004
can reject the null hypothesis of having no coefficients. The following
LnHHGAS 0.826** 0.973 0.031
table also shows that the model qualifies the serial correlation (Q-sta­ LnPOPGR − 0.284 − 0.376 0.836
tistics, Breusch-Godfrey Serial Correlation LM test) and Hetero­ C − 0.018** − 0.937 0.037
scedasdicity (Breusch-Pagan-Godfrey test, ARCH test):

4.4. ARDL bound test results Table 6

Short-run estimation.
After meeting the previous test results, this study now moves to the Variables Coefficient t-stat. Prob.
ARDL bound test result analysis. The long-run and short-run nexus
D(LnHHELEC) 0.283** 1.487 0.048
would be identified with the test. The following Table 3 shows the ARDL D(LnHHGAS) 0.087*** 0.947 0.008
bound test result, and the result reveals that the F-statistics, i.e., 4.716, D(LnPOPGR) 0.289** 1.385 0.041
4.370, 5.325, and 3.735. As mentioned in the methodology section, the ECM(-1) − 0.037*** − 1.873 0.009
critical value table by Narayan (2005) is mentioned inside the table and (AIC – ARDL, 2, 0, 1, 2, Dependent variable: LnGDPPC).
compared with the values in this test. LnGDPPC has the F-statistics value
that exceeded the upper bound of the 5% critical value, but lower and
in data. The current study takes household gas consumption in analysis
other variables have value beyond the upper limit of 1% critical value,
rather than taking gas consumption as a whole. Residential energy
making the values statistically significant.
consumption creates economic flow inside the country. For electricity
The above bound test with the time series data of economic growth,
production, Bangladesh is still mostly reliant on natural gas, coal, and
household electricity consumption, household gas consumption and
fossil fuels (IEA, 2019). Apart from natural gas usage for household
population growth from Bangladesh implies that the null hypothesis of
cooking purposes, it also contributes to producing more than 62% of
having no cointegration among the variables are rejected with the sig­
electricity, and only 3.3% are contributed by renewable energy sources
nificance levels of 1% and 5%.
(Taheruzzaman and Janik, 2016). Masud et al. (2020) have recom­
mended that the country minimize the gap between electricity supply
4.5. Long-run and short-run relationships and demand with electricity production from 4 to 5 kWh/m2 of solar
radiation as an average.
Both long and short-run equilibrium nexus are calculated using the With a negative coefficient of − 0.284 and a p-value of 0.836, pop­
ARDL (2, 0, 1, 2) approach. Tables 5 and 6 provides the test results of the ulation growth depicts a negative relation with Bangladesh’s economic
long-run and short-run estimation. The outcomes illustrate the relations growth. 1% increase in the population shows a 0.2% decrease in eco­
with variables taking economic growth as the dependent variable. nomic growth, to be specific. With more than 170 million people,
Table 5 shows that long-run household electricity consumption and Bangladesh is known as one of the world’s most densely populated
household gas consumption are positively related to the country’s eco­ countries. It is also known that the vast population is a big challenge for
nomic growth with the coefficients 0.147 and 0.826 with the probability economic growth and energy crisis and environmental degradation. To
values of 0.004 and 0.031. Therefore, this signifies that a 1% increase in meet the challenges of the rapid increase in electricity demand and
household electricity consumption in the country will be associated with allocating other resources, the government is taking actions like build­
a 0.1% increase in economic growth in the long run. In comparison, a 1% ing new power plants and encouraging energy-efficient household ap­
increase in household gas consumption will lead to a 0.8% increase in pliances. However, a big portion of the population is not skilled enough
economic growth. The study results are in line with the long-term results to provide a significant contribution to the economy. More investments
of Imran and Siddiqi (2010), Das et al. (2012), Alam et al. (2012) and in the population are suggested to convert this mammoth-sized popu­
Masuduzzaman (2012). However, Das et al. (2013) have not found any lation into human resources.
evidence of relation from gas consumption to the economic growth in On the other hand, the short-run estimation results in Table 6 reveal
Bangladesh, but the other way around. This could be due to the change that the variables are positively associated with the economic growth
with coefficients 0.283, 0.087 and 0.289 along with their probabilities
Table 3 0.048, 0.008 and 0.041, respectively. This means that in the short run, a
ARDL Bound test results. 1% increase of the explanatory variables leads to an increase in the pace
Variables LnGDPPC LnHHELEC LnHHGAS LnPOPGR of the economy with 0.2%, 0.08%, and 0.2% accordingly. The result is in
F-statistics 4.716**** 4.370*** 5.325**** 3.735** accordance with the research of Alam et al. (2012) for Bangladesh and
Critical Values 10% 5% 2.5% 1% Chandio et al. (2019) for Pakistan.
Lower bounds I(0) 2.72 3.23 3.69 4.29 The coefficient value of population growth is statistically significant,
Upper bounds I(1) 3.77 4.35 4.89 5.61
with a 5% significance level with a t-value of 1.385. The effect of pop­
R2 0.992 0.998 0.990 0.995
Adj. R2 0.991 0.997 0.986 0.993
ulation growth of the country has a positive impact on the short term
F-Statistic 489.164 967.475 654.684 878.358 and a negative effect in the long run; due to the nature of Bangladesh’s
Prob(F-Statistic) 0.000 0.000 0.000 0.000 economy, which is still highly agriculture and labor-intensive, more
Note: **, *** and **** denotes 5%, 2.5% and 1% statistical significance. population indicates there are more hands to do the work. The

6
G. Zhang et al. Energy Policy 156 (2021) 112420

manufacturing industry in the country has the most considerable impact

on the economy. The demography of the country shows that the median
age of the population is 27.6 years, which indicates, a significant portion
of the population is included in the workforce and they can directly
contribute to increasing the GDP of the country and this is likely to
continue till upcoming few years. The current life expectancy is 73.6
years with a population growth of around 1%. Along with the rapid
development of lifestyle and health status, the country is expected to
improve the life expectancy even longer in coming years. On the other
hand, the increased population of the country will create a burden to the
economy with a large portion of the aged group in the future who will
not be able to contribute to the labor-intensive economy. RMG in­
dustries usually pick Bangladesh because of its cheap labor. Therefore,
the nature of the country’s economic activities allows more population
to contribute to the economy’s growth for the time being. However, the
scenario changes. In the long run, Bangladesh needs to think about
Fig. 4. Plot of CUSUM of squares results.
getting rid of its high dependency on laborers. The country will not be
able to provide enough resources for the vast population with its current
reserve in the future. It can focus more on improved services industries Table 7
like China and India for sustainable growth. Granger causality/block exogeneity Wald test results.
Moreover, the short-run estimation also reveals the value of ECM,
Dependent Independent variables
which is negative (− 0.037) and significant in a 1% level, which is ex­ Variables
LnGDPPC LnHHELEC LnHHGAS LnPOPGR
pected. With every year, there are 3.7% adjustments of the scenario goes
towards the long-run equilibrium. LnGDPPC – 5.562** 2.856 0.957***
LnHHELEC 5.353 – 5.683 5.825**
LnHHGAS 1.254 2.482*** – 5.844***
4.6. Model stability test results LnPOPGR 0.834 1.947 1.285*** –

To ensure the stability of the model, there are some robustness

checks done with the ARDL model estimation. The cumulative sum of
recursive residuals (CUSUM) and cumulative sum of recursive residuals
of squares (CUSUMSQ) has been conducted to check the stability of the
model shown in Figs. 3 and 4. To ensure parameter consistency and
model stability, plots of the CUSUM and CUSUMSQ should be inside the
5% critical bound. The graphical presentation of the stability test result
shows that plots are inside the expected boundaries for both tests. The
plot suggests that the variables experienced no systematic change over
the sample study period.

4.7. Granger causality test results

Following the long-run and short-run ARDL estimation test results,

the direction of the long-run relationship among the variables is also
important to explore. The Granger causality test has been conducted to
determine the direction of the relationships, and the test results are
given in Table 7. As there exists a cointegrating relationship among the
variables, it is expected that there will be one way or two-way direc­
tional relationship within the variables. Following the Toda-Yamamoto
(1995) approach, the short-run granger causality/block exogeneity
Fig. 3. Plot of CUSUM results.
Fig. 5. Causality channels.
Wald test suggests that there is one-way causality running from the
population growth and household electricity consumption to the eco­
nomic development of the country. Household gas consumption and
population growth also show a unidirectional relationship to electricity
consumption. However, population growth and household gas con­
sumption show a two-way causality relationship with the test result.
This test result also validates the ARDL test results.
Our findings presented in Fig. 5 are similar to Alam et al. (2012) and
Masuduzzaman (2012), with comparable causality results about elec­
tricity consumption with the country’s economic growth. In a study of
Imran and Siddiqi (2010) for Bangladesh, energy consumption was
found with a long-term relation with the economic growth; however,
their short-run results did not find any evidence for it, which could be
because Bangladesh was more dependent on agriculture and production
industries that time. Das, McFarlane and Chowdhury (2013) also found
no evidence that gas consumption causes economic growth. However,
gas consumption has an impact on electricity consumption that leads to
economic growth. Therefore, we may assume that household electricity
consumption and household gas consumption play an important role in
Bangladesh’s economic development. Ma et al. (2016) have also
analyzed China’s economic growth, household energy consumption, and
emissions and found that the country is in the “process of

7
G. Zhang et al.
industrialization” which is similar to that of Jiang et al. (2019), Zhang
et al. (2019) and supported by Zhang et al. (2021). It has predicted more
residential energy demands in the near future and suggested about
energy-saving and emission-reducing lifestyle. Policymakers may think
about adopting new technologies (Hossain and Chen, 2021), marketing
adjustments and public education in developing economies to incorpo­
rate household energy consumption with the national energy as sug­
gested by Han et al. (2018) for China. Pachuri and Jiang (2008)
analyzed household energy consumption in two developing courtiers,
China, and India. They have stated that the total consumption of
household energy consumption in China was twice that of India at that
time. Economic development performance has been seen much better
for China than India, suggesting that policymakers take similar initia­
tives to ensure Bangladesh’s growth. To meet the energy poverty of
household energy in the country, Barnes et al. (2011) have suggested
access to modern energy and efficient use of traditional energy that is
likely applicable to other developing nations like in China (Zhang and
Su, 2016; Zhang et al., 2016). Appliances that save energy could be
patronized by the authorities to ensure less pollution (Zhao et al., 2019).
Higher population growth has led to higher household energy con­
sumption in another comparative study of a developing country,
Ethiopia (Guta, 2014). The findings would fit with other lower-income
countries regarding strengthening the importance of energy consump­
tion in residential sectors.
5. Conclusion and policy implications
This paper has assessed the relationships among the economic
growth, household electricity consumption, household gas consumption
and population growth in Bangladesh from 1975 to 2018 with ARDL
long and short-run estimations and causality analysis. The cointegration
is investigated in this study with the ARDL bound test approach. Long-
run and short-run dynamics were assessed with the unrestricted error
correction approach. Toda-Yamamoto approach was used for the
Granger causality calculations.
The ARDL approach confirms relationships among the variables both
in the long and short-run, which validates the necessary model diag­
nostic and stability tests. Later, Granger causality analysis has provided
an insight into the direction of the relationships. Household electricity
and population growth show short-run unidirectional relation towards
the economic growth of Bangladesh. Where the population growth and
household gas consumption also show a unidirectional relationship to­
wards household electricity consumption. On the other hand, popula­
tion growth and household gas consumption show bidirectional
relationships.
The country’s economic growth is directly positively related to
household electricity consumption, on the other hand, indirectly related
to household gas consumption. Both in short and long-run dynamics,
household electricity and gas consumption are associated with economic
growth. An increase in household energy consumption will lead to
increased GDP. However, economic growth in the country is associated
with population growth as well. In the short run, it shows that the
population growth boosts the economy; however, it will lead to an
obstacle to the economy in the long run, which is due to its labor-based
economy. The study suggests that Bangladesh is currently in not any
position to take household energy-saving policies to save the economy.
The previous energy policies have targeted to ensure electricity for every
household by 2020, which has not been fulfilled yet. As our study sug­
gest, economic development here is caused by household energy con­
sumption, authorities must ensure the availability of electricity for the
residents.
The garments sector in Bangladesh plays a vital role in economic
growth. The consumption of energy here belongs to industrial or com­
mercial electricity consumption. Urban and rural lifestyles are supposed
to be highly dependent on electricity consumption; however,
Bangladesh is yet to reach that level. A way to improve the situation
8
Energy Policy 156 (2021) 112420
would be to implement more environment-friendly energy sources and
authorities to ensure efficient electricity use in household sectors. “En­
ergy Efficiency and Conservation Master Plan up to 2030” was set by the
government in 2015. However, the gap between energy availability in
rural and urban places, especially for households, has not been
addressed here. A significant implication of this policy would be to fill
the above gap. The country’s economy can smoothly move ahead when
the energy will be properly managed in rural areas. Current energy
appliances in the country are backdated, and this causes waste of energy.
Improved home appliances will be adequate to meet these problems. For
the time being, sudden shock towards the limitation of household
electricity consumption and the population growth might cause slow
economic growth, which has been found in this study. The domestics
electricity price is increasing very quickly, as we have observed in
Bangladesh. This situation would most likely hamper economic growth.
The government should make sure the mass population is not affected
and lessen household electricity consumption. Like other developing
countries, Bangladesh should adapt to newer technologies and ensure
efficient energy use for households.
Furthermore, as Bangladesh households are also highly dependent
on the consumption of natural gas for cooking and electricity usage, they
rely on the national grid; there is still scope for more efficient use of
energy, which will come with a more logical and well-maintained en­
ergy policy from the top level of the government. Bangladesh is not so
vast in land size; however, it has enough solar and water resources to
produce renewable energy, which could be an alternative to the tradi­
tional electricity and gas sources. “Renewable Energy Policy of
Bangladesh – 2009” has set their target to contribute 10% in national
energy consumption by 2020, which has not been met yet. An impor­
tation addition of the policy could be aligning the households with
renewable energy. Solar PV schemes and financial incentives would
encourage people to adopt renewable for residential use. There are po­
tentials of producing nuclear power as well. Bangladesh can follow the
energy policies of Malaysia, China, Indonesia, etc., to understand better
how to cope with energy and environmental degradation.
Nevertheless, policies taken by the government only are not suffi­
cient enough. There is a need for mass awareness of the introduction of
alternate energy at the social level. In addition, domestic and multina­
tional business entities running in Bangladesh should be given proper
direction and encouragement about energy usage in efficient ways and
moving towards renewable energy. The country is already facing the
biggest challenge of ecological changes like global warming, drought,
flood, etc. It is high time the country should respond.
The industrial sector-wise electricity and gas consumption can be
another way of understanding economic growth relations to industrial
energy consumptions, which is recommended for future study. Research
about renewable energy production and consumption will also be vital
to energy-related literature in Bangladesh.
CRediT authorship contribution statement
Guoxing Zhang: Conceptualization, Supervision, Methodology. Md
Nuruzzaman: Data curation, Software, Writing – original draft, Visu­
alization. Bin Su: Conceptualization, Resources, Writing – review &
editing.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Acknowledgements
The authors are thankful for the support of research grants by Na­
tional Natural Science Foundation of China (72034003, 71874074,
G. Zhang et al. Energy Policy 156 (2021) 112420

71874177).

Appendix
Table A.1
ADF and KPSS Unit Root Tests results

Variables ADF KPSS

H0: Variable has a unit root at level H0: Variable is stationary at level

Intercept Trend and Intercept Intercept Trend and Intercept

LnGDPPC 1.101 (0.9969) − 3.684* (0.0343) 0.809 0.219**

LnHHELEC − 1.570 (0.4886) − 0.791 (0.9585) 0.830*** 0.208**
LnHHGAS − 1.600 (0.4737) − 4.642*** (0.0031) 0.838*** 0.187**
LnPOPGR − 0.0733 (0.9455) − 1.952 (0.6088) 0.739*** 0.182**

First difference

LnGDPPC − 9.919*** (0.0000) − 9.536**** (0.0000) 0.527** 0.112*

LnHHELEC − 6.339*** (0.0000) − 7.153**** (0.0000) 0.370* 0.105
LnHHGAS − 3.113** (0.0333) − 3.025** (0.0138) 0.479** 0.157**
LnPOPGR − 3.802*** (0.0060) − 3.583** (0.0442) 0.421** 0.147**
[Note: ***, ** and * denotes 1%, 5% and 10% significance level respectively; values in the parentheses are the p-values.].

Table A.2
Zivot-Andrews Unit Root test results

Variables t-statistics Breaks

LnGDPPC − 0.585 2010

LnHHELEC − 2.555 2007
LnHHGAS − 4.903 1992**
LnPOPGR − 4.907 2003**
[Note: the critical values are − 5.34, − 4.93 and − 4.58 for 1%, 5%
and 10% respectively].

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