# **2. Related Literature**

The long-term relationship between electricity consumption and economic growth has been well researched. Apergis and Payne (2011) find a causal relationship between electricity consumption and economic growth for 88 countries over 1990–2006. In high-, upper-middle-, and lower-middle-income countries, the causality runs in both directions. In low-income countries, they find only a unidirectional causality from electricity consumption to economic growth.

Due to the strong association of electricity consumption and economic activity, variations in electricity consumption can be used to assess economic fluctuations. Chen et al. (2020) find that electricity usage in Europe declined between 10 and 15 percent during the acute phase of the COVID-19 pandemic. Historically, a 1 percent drop in electricity usage in Europe has been associated with a 1.3 to 1.9 percent drop in output. Cicala (2020) observes a one-to-one relationship between the variables of interest in the United States, including during the global financial crisis, and uses the relationship to assess the economic damage from COVID-19. Similarly, Beyer, Franco-Bedoya, and Galdo (2021) show that energy consumption declined strongly in India after a national lockdown was implemented on March 25, 2020, and confirm that electricity consumption can be a useful indicator in emerging market economies. <mark>Ai, Zhong, and Zhou (2022)</mark> estimate the impact of the COVID-19 pandemic in Hunan province (China) through firm-level electricity consumption data. They employ a difference-indifferences model to show that electricity consumption in Hunan province dropped by 27.8 percent during the early stage of the pandemic.

For Bangladesh, empirical evidence of the relationship is ambiguous. Yıldırım, Sukruoglu, and Aslan (2014) do not find a link between energy consumption and economic growth in Bangladesh. Mozumder and Marathe (2007) find a unidirectional causality from per capita gross domestic product (GDP) to per capita electricity consumption, using annual data from 1971 to 1999. Along the same line, Asghar (2008) examines the causality between energy consumption and income from 1971 to 2003 and concludes that in Bangladesh, a unidirectional Granger causality runs from GDP to electricity consumption. In contrast, Sarker and Alam (2010) and Hossain and Saeki (2011) find a reverse causal relationship running from electricity generation to economic growth. More recently, Hossen and Hasan (2018) find unidirectional causality running from electricity consumption to GDP in Bangladesh from 1972 to 2011. Finally, Alam et al. (2012) and Ahamad and Islam (2011) find bi-directional, long-run causality between Bangladesh’s economic activity and energy consumption.

Our study contributes to the literature in three ways. First, it reconsiders evidence on the causality between electricity consumption and economic activity in Bangladesh at annual frequency and adds monthly analysis. Second, this is the first study to analyze electricity consumption as an high-frequency economic indicator for Bangladesh, with lessons for other emerging markets and developing economies. Third, it uses the indicator to compare the costs 3