The causal relationship between electricity consumption and economic growth in a Gaming and Tourism Center: The case of Macao SAR, the People’s Republic of China

Abstract

A number of Asian cities decided to establish gaming and resort facilities in order to capitalize on the growing number of gamblers and their family members in Asia. In doing so, they expect to sustain economic growth but, on the other hand, will consume a considerable amount of energy. Nevertheless, the causal relationship between economic growth and electricity consumption in this type of service-oriented territories has never been investigated. Using the historical data obtained from the Government of Macao SAR, we found that electricity consumption and economic growth in terms of gross domestic product are co-integrated for the period of 1999 Quarter 1–2008 Quarter 4. Moreover, vector error correction (VEC) models indicated a lack of short-run relationships but showed that there was a long-run equilibrium relationship between electricity consumption and gross domestic product. The accuracy of VEC models was assessed by using the mean squared error and the mean absolute error. The error analysis shows that VEC models reproduced time series of gross domestic product and electricity consumption in difference form accurately.