Does energy efficiency, renewable energy and effective capital promote economic growth in the emerging 7 economies? New evidence from CS-ARDL model

Abstract

Gross Domestic Product is regarded as the major indicator which determines the standards of living in a country. Consequently, energy use is far regarded as one of the major determinants of economic growth in an economy. However, fossil fuel energy greatly contributes to environmental degradation, global warming and the spread of various diseases. The present-day research is aimed at examining the effect of energy efficiency, renewable energy and effective capital on Gross Domestic Product in the emerging seven countries (Brazil, Russia, Mexico, Turkiye, Indonesia, China and India), during the period 1990 to 2019. The main novelty of the research is that it examines the effect of effective capital on Gross Domestic Product, a study which has not been done. Effective capital which is the combined effect of energy and physical capital in the production process is inevitable in raising economic growth. Additionally, the effect of energy efficiency on economic growth in the emerging seven countries has been partially investigated. The findings of this research are robust and unique to those of past researches, because Cross-sectional Augmented Autoregressive Distributive Lag technique which is strong in the presence of cross-sectional dependence, heterogeneity and dynamics is employed. The outcomes provided in this research shows that, energy efficiency and effective capital significantly promotes economic growth, while non-renewable energy provides significant positive effect in the short-run, with no significant effect in the long-run. This study recommends the efficient utilization of energy, ensuring that each single unit of energy employed produces the highest possible output.