Interconnections Between Industrialization, Economic Growth, Environmental Degradation, Resource Depletion, and Energy Demand in CEE(S) Economies: Insights from Bootstrap Panel Causality Analysis

Abstract

This paper investigates the causal relationships between energy demand (ED) and four macroeconomic variables which are: economic growth (EG), industrialization (IND), environmental degradation (ENV), and resource depletion (RD) in the economies of Central and Eastern European (CEE) countries, namely Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia during the period from 2004 to 2021. Three sub-variables were used for each macroeconomic variable to create a composite index. The causal associations between each macroeconomic variable and ED were investigated separately. Bootstrap Panel Granger causality method had been utilized. The results reveal cross-sectional dependence and country-specific heterogeneity within the CEE panel. The results demonstrated one-way causality from IND to ED in Estonia, Hungary, and Poland. In Slovakia, the causality test identifies a one-way causality from ED to IND. In Lithuania, ED is influenced by ENV in a one-way direction. In Poland, Slovakia, and Slovenia, there is a one-way causality relationship between ED and ENV. Except for the Czech Republic, all countries in the panel, demonstrate that EG drives ED. A two-way causality relationship between EG and ED is identified in Poland, Slovakia, and Slovenia, emphasizing the need for sustainable energy policies to balance energy use and environmental impacts. Furthermore, there is a one-way causality between RD and ED in Poland and a one-way causality from ED to RD in Slovakia. A two-way causality between RD and ED is observed in the Czech Republic, Hungary, Latvia, and Lithuania.