The relationship between Electricity consumption and business cycles in Iran with emphasis on the industrial sector

 The purpose of this study is to evaluate Electricity consumption over the business cycles of industrial production of Iran during 1967- 2013. In this paper, the existence of co-integration between electricity consumption and industrial production is checked using ARDL approach and causal relationship between electricity consumption and industrial production is investigated. The results indicate a dual causality between electricity consumption and industrial production. Moreover trend cycle component of industrial production and power consumption is separated using Hedrick - Prescott (HP) filter. Assessment of the causality between components of trend variable and cycle variable shows a long-term relationship. Results indicated that in 2011 the industrial sector has the highest and in 2013, the lowest value-added. Despite of periods of sharp downturn in the industrial sector, during this periods, the power consumption is not reduced accordingly. Even in some periods electricity consumption was high, and it could be due to low price levels and corporation not paying enough attention to the energy costs in production. But after the approval of law of optimization of subsides, some industrial sectors reduced their electricity consumption.