Energy-growth Nexus Research Articles

On the restricted form of energy-growth nexus: a global level VECM approach and the historical structural breaks

PurposeThe purpose of this paper is to focus on global energy consumption using the economic growth nexus, the prevalent energy hypothesis at a global level and the impact of the main historical events assessed for the period from 1965 to 2015.Design/methodology/approachGiven the confirmed presence of endogeneity and cointegration between energy consumption and economic growth, a vector error correction with structural dummies model was used. Furthermore, the impulse-response functions and variance decomposition were computed to evaluate the variables’ dynamics.FindingsBi-directional causality running from energy consumption to economic growth was found, both in the short and long-run, supporting the feedback hypothesis. It is proved that the 2008 crisis impacted on the global energy–growth nexus. Furthermore, there is evidence of the impact of the 1990s oil price shock on the nexus. Innovations in energy consumption have a positive impact on economic growth; however, this impact tends to be null in the long run.Practical implicationsThe results suggest that at a global level, any energy policy should be carefully designed in order not to hamper economic growth. Countries should not remain indifferent to the policies that other countries might follow. Very few historical crises impacted on the global energy–growth nexus.Originality/valueThis paper offers a different approach to the study of the energy–growth nexus. The energy–growth nexus is analysed in the major macroeconomic aggregate. Global variables reveal their relevance as a benchmark in the energy–growth nexus. Furthermore, this paper arrives at some conclusions about how historical crises impact on global relationships.

The renewable energy and economic growth nexus in European countries

AbstractThe study examines the long‐run relationship between renewable energy consumption and economic growth within the framework of the traditional production function in 29 European countries from 1995 to 2016. The study was based on the panel unit root tests, panel cointegration test—the Kao (1999), Pedroni (1999, 2004), Westerlund (2005) and fully modified ordinary least squares estimator and dynamic ordinary least squares estimator. The study found that there is a long‐term equilibrium relationship between economic growth and renewable energy consumption and that renewable energy consumption has a positive impact on economic growth. The results suggest that the use of renewable energy as a global commodity in the process of economic growth is highly significant. Therefore, policies to promote renewables can provide for economic growth, an increase in renewables and the reduction of greenhouse gas (GHG) emissions, and ensure important sustainable development goals.

Revisiting the Relation between Renewable Electricity and Economic Growth: A Renewable–Growth Hypothesis

Global concern about the climate crisis has incited movements for switching to renewable electricity. Renewable electricity can contribute to economic growth as an input factor (electricity generation) and also as an industry (renewable manufacturing). We introduce a new hypothesis, the renewable–growth hypothesis, to investigate the role of the renewable manufacturing industry in the energy–growth nexus study. To test the hypothesis, we select a target country group using the market share of the renewable manufacturing industry and conduct the Granger causality test for solar photovoltaic and wind power. The autoregressive distributed lag bounds testing approach is applied for the causality test. The results show that renewable electricity Granger causes economic growth in target countries, which supports the renewable–growth hypothesis. However, the hypothesis did not hold in countries that export renewable power facilities more than they install them for domestic demand. We believe that the renewable–growth hypothesis would be secured soon if renewable electricity expands broadly over the world.

Renewable energy, institutional stability, environment and economic growth nexus of D-8 countries

The anthropogenic impact of conventional energy sources encourages the utilization of renewable energy, as it has become a strategic commodity for economic growth. On the other hand, institutional stability is the pre-requisite without which environmental quality cannot be assured and the economy cannot function. However, in recent literature, very little consideration has been given to this important phenomenon. This study is set to analyze the energy-institutional stability-economic growth nexus, as well as the energy-institutional stability-environmental quality nexus, by incorporating the Cobb Douglas production function and the Diet and Rosa environmental function respectively. The sample consists of the D-8 countries and the time period spans 1990 to 2016. To analyze the developed models, Autoregressive Distributive Lag (ARDL), Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) tests are applied, along with other econometric techniques. The panel ARDL statistics indicate significant cointegration among all variables of both functions, while the FMOLS test reveals that consumption of both nonrenewable and renewable energy has a positive impact on economic growth, as well as on environmental degradation. Further, results indicate that institutional stability is crucial for establishing a nation on a sound footing and protecting environmental quality. Based on these results, the study suggests a blend of both types of energy and a gradual transition toward renewable energy sources, with better implementation of policies and technological advances, to produce, preserve, and transmit renewable energy production.

Energy and economic growth in G20 countries: Panel cointegration analysis

Rising economic performance has enlarged energy demand, carbon emissions and global warming. Policymakers need to avoid global warming. Therefore, energy-growth nexus is important. This paper empirically investigates the relationship between energy consumption and economic growth for a panel of G20 countries over the period 1990-2016. For this purpose, the paper considers the panel cointegration and panel vector error correction model. Panel cointegration test set out a long-run equilibrium relationship. Long-run relationship is estimated using a Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS). The results show that causality run from energy consumption to GDP. It is indicates that “growth hypothesis” is valid for G20 countries.

A disaggregated approach to energy-growth nexus: Micro-regional view

We explore the relationship between economic growth and energy consumption using regional level data for 2004–2014 period. Data on electricity consumption for regional distributional areas cannot be used with the economic data for county/regional level since the borders of regional electricity distributional areas do not correspond to administrative NUTS-3 borders. We use a proprietary dataset of actual electricity consumption for Croatian counties which allows us to revisit the energy-growth nexus dilemma from a disaggregated viewpoint. We find significant policy implications stemming from comovement between counties and long term positive influence of energy, capital and labour on industrial output.

Does governance quality moderate the finance-renewable energy-growth nexus? Evidence from five major regions in the world.

This paper investigates the moderating role of governance quality on the finance-renewable energy-growth nexus in five major regions in the world, including 123 countries from 1990 to 2017. In a disaggregated approach, we used several financial variables denoting financial depth, financial efficiency, financial inclusion, and financial stability, which represent the different components of financial development. In an aggregated approach, we constructed composite indexes of governance quality and financial development following the principal component analysis (PCA). Next, we applied the two-stage least squares, difference-GMM, and system-GMM methods, as well as the Granger non-causality test in (Dumitrescu and Hurlin Econ Model 29(4):1450-1460, 2012). First, the results show that financial development and improved governance quality are complementary drivers of economic growth in all regions, except in America and Europe and Central Asia in most cases. Similarly, renewable energy consumption and enhanced governance quality are interrelated factors in strengthening economic growth in the Asia Pacific, MENA, and SSA regions, as opposed to the Americas and Europe and Central Asia. Second, there is bidirectional causality between financial development and economic growth in all areas, while the two-way causality between renewable energy consumption and growth is only confirmed in America and SSA regions, respectively. This study reveals the threshold effect of governance quality on the renewable energy-finance-growth nexus across regions. Therefore, policymakers should improve the level of governance quality and the efficiency of financial systems and renewable energy consumption to promote sustainable development in the different regions, especially in the Asia Pacific, MENA, and SSA zones.

Citation-based systematic literature review of energy-growth nexus: An overview of the field and content analysis of the top 50 influential papers

This study is a systematic survey of literature on the energy-growth nexus, which has been carried out with a view to identifying the leading sources of knowledge in the forms of the most influential journals, authors, and papers. This study not only recognizes and classifies the well-known methodologies used in the energy-growth nexus analysis but also reveals intriguing content-based findings, with quantitative measures for the top 50 papers ranked according to the highest average citations per year. This survey is unique in that the process of selecting articles is entirely objective, allowing the research community's opinions to take the lead in the process rather than any subjective judgments of the authors. In this way, we examine 1041 peer-reviewed articles that specifically focused on the energy-growth nexus. We found that, as of the end of 2017, with 200 articles, Energy Policy is the leading journal publishing on this area while Energy Economics, with a total of 25,352 citation counts, holds the highest impact on this field of research. In addition, the most frequently cited article by the scholastic community in terms of average citations per year has been a literature survey conducted by Ozturk (2010). Our study's main conclusion, based on a thorough content analysis, is that the nexus results of previous studies are generally inconclusive, with conflicting policy implications. This is not helpful and to a large extent is due to a lack of an appropriate theory. This, we contend, is essentially a methodological weakness and could be addressed by incorporating an appropriate testable economic/environmental theory.

Renewable and non-renewable energy-growth nexus: A panel data application for the selected Sub-Saharan African countries

In order to protect the environment the role of renewable energy is gratefully appreciated. This study investigates the effects of renewable energy and non-renewable energy on output for the selected six Sub-Saharan African countries during 1990–2015 period by employing a simple production function of capital, labor, renewable and non-renewable energy inputs. The impact of the variables on output are quantified by using panel estimation techniques. The Pedroni Panel cointegration test indicates long run relationship between the variables. The results show that the long-run estimated coefficients of the analyzed variables are positive and statistically significant. According to the findings the elasticity estimates of renewable energy and non-renewable energy are very close. The policy implications of the results are discussed as well.

Exploring the Effect of Energy Consumption on the Economic Growth of Albania

Albania is one of the most energy-resource abundant country, however faced with high domestic electricity demand. Moreover, the country is the largest crude oil producer in Europe. In this study, we investigate the following questions: (i) Is there a long-run association between energy consumption and output in Albania? (ii) What is the magnitude of energy effect in the short- and long-run on output in Albania? (iii) Which of the four hypotheses on the energy-growth nexus describes most appropriately the energy-growth nexus in the case of Albania? (iv) How do the results compare with those of earlier studies? Thus, the study examines the effect of energy consumption on the economic growth of Albania over the periods 1980 to 2014 using a Cobb-Douglas production function whilst controlling for multiple structural breaks. The short-run and long-run estimations are carried out using the autoregressive distributed lag (ARDL) bounds procedure. Causality is examined using the vector error correction method. Also, we conduct consistency and robustness checks using other regression methods. The results from the ARDL procedure indicate that the elasticity of income with respect to energy is 0.36. This implies that ceteris paribus, a 1% increase in energy consumption will increase output by 0.36%. The causality result supports the conservation hypothesis which implies that economic growth drives energy consumption, which is consistent with some of the earlier studies.

The ARDL Method in the Energy-Growth Nexus Field; Best Implementation Strategies

A vast number of the energy-growth nexus researchers, as well as other “X-variable-growth nexus” studies, such as for example the tourism-growth nexus, the environment-growth nexus or the food-growth nexus have used the autoregressive distributed lag model (ARDL) bounds test approach for cointegration testing. Their research papers rarely include all the ARDL procedure steps in a detailed way and thus they leave other researchers confused with the series of steps that must be followed and the best implementation paradigms so that they not allow any obscure aspects. This paper is a comprehensive review that suggests the steps that need to be taken before the ARDL procedure takes place as well as the steps that should be taken afterward with respect to causality investigation and robust analysis.

Does Governance Quality Moderate the Finance-Renewable Energy-Growth Nexus?: Evidence from Five Major Regions in the World

This paper investigates the moderating role of governance quality on the finance-renewable energy-growth nexus in five major regions in the world, including 123 countries from 1990 to 2017. These regions concern the Asia Pacific, Europe & Central Asia, America (North America and Latin America & Caribbean), Middle-East and North Africa (MENA), and Sub-Saharan African (SSA) regions. Following the principal component analysis (PCA), we constructed composite indexes of governance quality and financial development using six institutional indicators and eight financial variables. Next, we applied the two-stage least squares, difference-GMM, and system-GMM methods, as well as the Granger non-causality test in Dumitrescu and Hurlin (2012). First, the results show that better governance quality wipes out the harmful effects of financial development and renewable energy consumption on economic growth in the Asia Pacific, MENA, and SSA regions, respectively. Conversely, the level of governance quality reduces the positive effects of financial development and renewable energy consumption on economic growth in America, with few exceptions in Europe & Central Asia region, respectively. Second, we find marginal adverse effects of financial development and renewable energy consumption on growth in the Asia Pacific, MENA, and SSA regions due to their low levels of governance quality. However, the marginal effect of renewable energy consumption on growth is positive in America and Europe& Central Asia regions, whereas the marginal effect of financial development is negative in these regions in most cases. Third, there is bidirectional causality between financial development and economic growth in all areas, whereas the bidirectional causality between renewable energy consumption and growth is only confirmed in America and SSA regions, respectively. This study reveals the threshold effect of governance quality on the renewable energy-finance-growth nexus across regions. Thus, financial development, renewable energy consumption, and governance quality are complementary factors to enhance economic growth in the Asia Pacific, MENA and SSA regions, contrary to America and Europe & Central Asia regions, with some exceptions. Therefore, policymakers should improve the level of governance quality, the efficiency of financial systems and renewable energy consumption to promote sustainable development in the different regions, especially in the Asia Pacific, MENA, and SSA regions.

The Mitigating Effect of Governance Quality on the Finance-Renewable Energy-Growth Nexus: Some International Evidence

This study analyzes the conditional effect of governance quality on the dynamics between financial development, renewable energy consumption, and economic growth in 123 countries from 1990 to 2017. We built composite indexes of financial development and governance quality through the principal component analysis (PCA) by using several financial variables and governance indicators. We employ the generalized method of moments (GMM) and the two-stage least squares (2SLS) techniques, but also the Granger non-causality in Dumitrescu and Hurlin (2012). First, the disaggregated analysis shows that renewable energy consumption,financial inclusion, financial efficiency, and financial stability have positive marginal effects on economic growth under a good governance quality, except for financial depth. These results differ across countries with different income levels. Second, the aggregated analysis confirms the positive marginal impact of financial development on growth only in low-income economies, whereas renewable energy consumption has positive marginal effects only in lower-middle-income and upper-middle-income economies. Finally, in most cases, the feedback hypothesisis confirmed between financial development and growth in all countries. Similarly, the bidirectional causality between renewable energy consumption and growth is also confirmed in lower-middle-income and low-income countries, exceptforhigh-income and upper-middle-income economies. Overall, governance quality has a threshold effect on the finance-renewable energy-growth nexus, which varies across countries. Thus, financial development and good governance quality are complementary driving forces for growth in most countries, except in upper-middle-income countries, whereas the complementary effect between renewable energy consumption and governance quality holds only in low-income and high-income countries. Accordingly, our study suggests more improvements in the governance quality in these countries, especially in the low-income and high-income countries to enhance the marginal impacts of financial development and renewable energy consumption on growth.

The Role of Institutions in the Renewable Energy-Growth Nexus in the MENA Region: a Panel Cointegration Approach

Institutional quality plays an undeniable role in every goal of accelerating economic growth. While the MENA region offers many natural assets that can make investments in renewable energy profitable, this region suffers from several institutional quality issues. In this line of thinking, this paper examines the relationship between renewable energy and economic growth in MENA countries taking into account institutional measures. To get a deeper insight into the relationship between this triangle of annual variables spreading from 1986 to 2015, our study considered a broader set of institutional variables, namely, corruption, bureaucracy quality, democracy accountability, law and order, and ethnic tensions. Using panel cointegration tests, we found that renewable energy, economic growth, and any institutional measures, of all considered in this study, are cointegrated. Furthermore, we found a strong causality running from renewable energy and any institutional measure, except law and order, to growth. A reverse path is also observed since there is also a strong causality running from growth to renewable energy when the causal regression includes any institutional measure. Our findings corroborate the fact that establishing an attractive institutional framework in MENA countries could be of ultimate importance in the profitability of renewable energy investments and in accelerating economic growth.

Are There Spillovers from China on the Global Energy-Growth Nexus? Evidence from Four World Regions

This paper analyses China’s energy consumption and economic growth spillover effects on four world regions: (i) America (North and South); (ii) Europe and Central Asia; (iii) Asia Pacific; and (iv) Africa and the Middle East. An annual aggregated time series by world region, from 1970 to 2016, and an autoregressive distributed lag (ARDL) approach were used. The results are consistent with the feedback hypothesis in the short run. With regard to the long run, feedback is present in America and the Asia Pacific. In Europe and Central Asia and in Africa and the Middle East, the results are consistent with the conservation hypothesis. Additionally, China’s spillover effects on the world energy-growth nexus are essentially a long-run phenomenon, with impacts on Europe and Central Asia, Asia Pacific, and Africa and the Middle East. Accordingly, policy-makers should be aware that China’s policies may have impact around the world, which indirectly may cause a restriction in economic growth.

Revisiting and revising the energy-growth nexus: A non-linear modeling analysis

The third millennium was characterized by the generalized conscience about the role of energy in boosting the wealth. Indeed, the aim of this survey is to estimate the threshold level of demand for energy above which energy consumption exerts negative impact on income level for 90 economies which are subdivided into three sub-panel (low-, middle-, and –high-income) during a time span 1990–2015. The resulting insights of the survey revealed that the nexus among the income factor and the energy use is nonlinear. For the high-income economies, the estimation results indicate that this threshold between the two regimes takes the value of 8.961 (=7793.9260). Furthermore, in the middle-income economies, the estimation results indicate that this threshold between the two regimes takes the value of 7.4875 (=1785.5825). However, in the low-income economies, the estimation results indicate that this threshold between the two regimes takes the value of 6.1967 (= 491.1256). These countries are invited to initiate stricter environmental policies, leading to a higher cost of producing pollution-intensive products for firms.

Another look at the energy-growth nexus: New insights from MIDAS regressions

Abstract In this paper, we offer the following contributions to the extant literature on the energy-growth nexus. First, we test the predictability of the energy components in the predictive growth model using the autoregressive distributed lag mixed data sample (ADL-MIDAS) approach. Second, we compare the in-sample and out-of-sample forecast performances of the MIDAS approach with the uniform frequency approach involving the autoregressive (AR) model as well as the autoregressive distributed lag (ARDL) model. Third, we consider an array of energy proxies ranging from aggregate data to sectoral data of energy consumption (residential, commercial, industrial and transportation) and those defined by energy sources (petroleum, natural gas, coal, electricity, nuclear electricity and renewable energy). Fourth, we test whether accounting for asymmetries matters in the ADL-MIDAS regression model for the energy-growth nexus. The results support the significant predictability of energy for growth regardless of the measures of energy. In addition, the in-sample and out-of-sample forecast results overwhelmingly favour the ADL-MIDAS over other competing models. Thus, allowing for high frequency data for energy in the low frequency growth model will enhance the forecast accuracy of the model. However, we find that accounting for asymmetries does not matter in the energy-growth nexus.

Does static and dynamic relationship between economic growth and energy consumption exist in OECD countries?

The main purpose of this paper is to investigate the relationship between economic growth (EG) and energy consumption (EC) for the 34 OECD (Organisation for Economic Co-operation and Development) countries over the period 1990–2015.Analyze the static and especially dynamic sense of relation among EG and EC in OECD always stay interesting. Using three models to examine growth–energy nexus, energy–growth nexus and the two-way linkages between them, this work consolidated the empirical insights in this research axis. Empirical results support an feedback effect between EG and EC. This results have provided key suggestions and recommendations which have important energy and economic policies implications for OECD policymakers. This ensures sustainable economic development and serve as a motivation to search alternative energy sources to meet the burgeoning energy demand in this countries.

The asymmetric role of shadow economy in the energy-growth nexus in Bolivia

This paper estimates the energy demand function to examine the asymmetric relationship between the shadow economy and energy consumption in the case of Bolivia during the period of 1960–2015. The ambiguous empirical findings on shadow economy-energy demand nexus has inclined us to apply the nonlinear ARDL cointegration approach developed by Shin et al. (2014) and the Hatemi-J (2012) asymmetric causality test. The empirical evidence confirms the presence of an asymmetric relationship between the variables of interest. Positive and negative shocks to official GDP (true GDP) and the shadow economy have positive impacts on energy consumption. Energy consumption is positively and negatively affected by positive and negative shocks in financial development, respectively. A positive (negative) shock to capital decreases energy consumption. Another important finding concerns the complex causal direction between economic growth and energy consumption. This study provides new insights regarding to the use of official GDP (true GDP) and the shadow economy as economic tools to maintain energy demand for sustainable economic development.

Energy intensity, carbon emissions, renewable energy, and economic growth nexus: New insights from Romania

This study empirically examines the relationship between energy intensity, carbon emissions, renewable energy consumption, and economic growth for the case of Romania given the conflicting evidences in the literature between 1990 and 2014 on a quarterly basis. To this end, our study employs an autoregressive distributive lag (ARDL) model for cointegration, while direction of causality was achieved via the Toda–Yamamoto model. Empirical findings reveal cointegration among the variables under consideration. The causality results show feedback causality between energy intensity and economic growth while uni-directional causality is seen running from renewable energy consumption to economic growth. Thus, this study affirms the energy-led growth hypothesis. Therefore, our study corroborates with the current success story of Romania attaining her energy targets within two decades. However, there is need to sustain this milestone by further diversification of her energy portfolio into other cleaner energy sources.