Electricity Availability, Electricity Prices and Growth of Uganda’s Industrial Sector: A causality and shock impact analysis
Abstract
Evidence suggests that a well-developed and sound industrial sector plays a pivotal role in the economic development of nations. Given this empirical stance, the realization of sustainable growth trajectories for developing countries, Uganda in particular, requires policymakers to understand the causal relationships and assess how industrial sector output growth responds to sudden changes in its stimulus factors in a dynamic setting. This study investigated the causality relationships and assessed shock effects between electricity availability, electricity prices, and industrial sector performance in Uganda. Utilizing quarterly time-series secondary data for the period 2009–2024, the study estimated a Structural Vector Auto Regression with exogenous regressors (SVARX), employing Wald Granger causality tests and assessing impulse response functions (IRFs). The causality results reveal bidirectional causality between industrial sector output and both electricity access and consumption. Unidirectional causality runs from electricity installed capacity and supply volatility to industrial sector output, while no causality exists between industrial electricity prices and output. Furthermore, shocks to electricity supply volatility and consumption have asymmetric effects that die out by the eighth quarter, whereas shocks to installed capacity, access, and prices trigger asymmetric positive and negative impacts that persist beyond the eight-quarter period. Deliberate policy should cushion these factors against shocks for robust, sustainable industrial growth.
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References
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