Chapter 17 - Is there an asymmetric causality between renewable energy and energy consumption in BIC countries?

Abstract

This study examines the relationship between renewable energy consumption and economic growth in Brazil, China, and India using cointegration analysis and causality testing for the period 1971–2014. In this regard, we use autoregressive distributed lag (ARDL) bounds test approach and use the causality approach of Hatemi-J (2012) which is taking into account asymmetric behavior in causality. The ARDL findings show (i) when we look at the long-run coefficients obtained from the estimates, renewable energy consumption has a positive effect on growth in Brazil and China. However, the coefficient of renewable energy in India is not statistically significant. Additionally, the impact of gross fixed capital and total employment on economic growth is positive in all countries. In this context, we can say that the contribution of gross fixed capital investment and total employment to economic growth in all countries is more than the contribution of renewable energy consumption; (ii) the short-run forecast findings, we can state that renewable energy consumption has a positive effect on economic growth in Brazil. At the same time, one period-lag renewable energy consumption has a positive impact on economic growth in China. In India, renewable energy consumption has no statistically significant effect on economic growth. On the other hand, while capital has a positive effect on economic growth in all countries, total employment has a positive effect only on economic growth in Brazil and China; and the asymmetric causality findings show (iii) there is no causal relationship between renewable energy consumption and economic growth in all countries in both positive shocks and negative shocks.