Examining the bi-directional long run relationship between renewable energy consumption and GDP growth

Abstract

The bi-directional long run relationship between renewable energy consumption and GDP growth has been investigated in high income, upper middle income, lower middle income, and high income countries. To achieve this goal, the fully modified OLS was utilized. The results revealed that 79% of the countries have a positive bi-directional long run relationship between renewable energy consumption and GDP growth. This represents the feedback hypothesis. On the other hand, 19% of the countries showed no long run relationship between the variables. This represents the neutrality hypothesis. Besides, 2% of the countries showed a one way long run relationship from GDP growth to renewable energy consumption, confirming the conservation hypothesis, and from renewable energy consumption and GDP growth representing the growth hypothesis. Despite the mixed results across countries, it has been proved that the more persistent and significant the bi-directional long run relationship between the variables is, the higher the income countries are.