Investigating the Relationship Between Electricity Consumption, Electricity Price and Economic Growth in Iran

This paper examines the short-run and long-run relationships between electricity consumption and economic growth in Iran in the supply side model, in the period (1972- 2007)also the influence of price liberalization on economic growth and electricity consumption in the demand side model are estimated for the country in the same period. In order to investigate these relationships ARDL bounds test approach is used. The results of supply model suggest a negative unidirectional relationship running from economic growth to electricity consumption in the long-run. We also find a positive and bidirectional relationship between economic growth and electricity consumption in the short-run. The results of demand side model indicate that there are no long-run relationships among electricity price with electricity consumption and economic growth. Therefore electricity consumption in Iran does not necessarily lead to economic growth and liberalization policies of electricity price does not adversely affect on economic growth.