Causality between renewable energy, energy consumption, and economic growth

Abstract

ABSTRACTThis study examines the relationship between economic growth, renewable energy consumption, energy consumption, capital fixed formation, and trade openness for the period 1971–2015 for South Africa. In this regard, the study used auto-regressive distributed lag (ARDL) bound testing approach. The empirical findings show that the variables in the study are cointegrated indicating the existence of long-run relationship among them. Granger causality test shows that there exists bidirectional causality between renewable energy consumption and trade openness to economic growth. This result supports feedback hypothesis. The stability of model was also checked at the end. The empirical findings provide strong evidence that the interdependence between renewable energy consumption and economic growth indicates that renewable energy is important for economic growth, and likewise economic growth encourages the use of more renewable energy source.