Energy-led Growth Hypothesis Research Articles

Energy consumption and economic growth nexus in Somalia: an empirical evidence from nonlinear ARDL technique

ABSTRACT The objective of this study is to ascertain the asymmetric impact of energy consumption on economic growth in Somalia for the period 1985–2017. A novelty econometric method of the Nonlinear Autoregressive distributed lag (NARDL) technique and the Granger causality test are employed to confirm the aim of the study. The empirical findings revealed the presence of asymmetric co-integration between energy consumption and economic growth in the long run. Both positive and negative shocks in energy consumption enhance economic growth in Somalia in the long run, even though, the positive shock has a stronger significant effect on economic growth in the long run. In contrast, a negative shock in energy consumption causes economic growth, thus, confirming the energy-led growth hypothesis. Hence, this calls for the policymakers to devise investment policies that are aimed at the improvement of foreign and local investments in energy sector.

Does disaggregated renewable energy stimulate economic growth? The role of spatial effect

ABSTRACT This study attempts to empirically investigate the validity of energy-led growth hypothesis for renewable energy sources for developing countries. To this end, this paper estimates the impacts of disaggregated renewable energy sources on economic growth within a multivariate framework including the disaggregated non-renewable energy sources, capital, labour, institutional quality and human capital by using panel data of 32 lower/upper middle income countries over the period 2009 to 2019 and applying spatial dynamic techniques. Our results show the significantly positive impacts of individual renewable sources on economic growth. This study provides the first piece of evidence of spatial spillover effects from renewable energy on economic growth for developing countries. Our analysis reveals the significantly negative impacts of hydroelectricity on economic growth. Our analysis also confirms the importance of labour, institutional quality and human capital in driving economic growth.

Renewable, non-renewable energy consumption and income in top ten renewable energy-consuming countries: Advanced Fourier based panel data approaches

This study investigates the impact of renewable and non-renewable energy consumption on economic growth in the top ten renewable energy-consuming countries over the period 1970–2019 using newly developed Fourier panel cointegration and causality tests. The negligence of structural breaks can significantly alter causal relationships, leading to misinterpretation of renewable energy policies. This study eliminates the problem using Fourier-based techniques. The long-run estimates show that non-renewable energy supports economic growth in eight out of the ten countries, while renewable energy has a positive effect on economic growth in Brazil, the United Kingdom, and France. The Fourier causality test indicates that the energy-led growth hypothesis is valid for both types of energy in the United States, India, the United Kingdom, and Spain. While the non-renewable energy-led growth hypothesis is valid for Italy, the conservation hypothesis is valid for both energy variables for Germany and for renewable energy for China. The overall results show that renewable energy can also be an important driver of economic growth, although not as strong as non-renewable energy. Therefore, countries need to closely monitor economic development while pursuing policies to reduce fossil fuels and deploy renewables in a way that enables higher economic growth.

Renewable energy-led growth hypothesis: New insights from BRICS and N-11 economies

Despite the fact that the BRICS and N-11 economies have experienced tremendous economic growth in recent years, but required energy is mainly used from conventional sources. Therefore, policy makers have shifted their attentions towards promoting the production and consumption of renewable energy across all economic activities. Given the current situation, the goal of this study is to investigate the impact of renewable energy consumption on the economic growth of the BRICS and N-11 economies over 1995–2019 period. The study uses Augmented Mean Group and Methods of Moments Quantile Regression (MMQR) for empirical analysis that confirms the variation of the impacts of independent variables across different quantiles of economic growth to accomplish the said objective. The overall findings of the study indicate that renewable energy-led growth hypothesis exists in BRICS countries in AMG and at all quantiles in MMQR but surprisingly it does not exist in N-11 economies using both estimations. The study also applies [1] heterogeneous panel estimation and found that growth hypothesis exists in BRICS economies and conservation hypothesis exists in N-11 countries. Relevant policies on the basis of obtained results are also provided in the study for both groups of the countries.

Achieving sustainability and energy efficiency goals: Assessing the impact of hydroelectric and renewable electricity generation on carbon dioxide emission in China

This study examines the relationship between total renewable electricity generation, total hydroelectric generation, and carbon dioxide emissions (CO2e) for China. The autoregressive distributed lag (ARDL) model showed that renewable electricity generation, hydroelectric generation, and green innovation decreased CO2e in China from 1990 to 2018, whereas gross domestic product per capita and foreign direct investment increased CO2e. Moreover, the Granger-causality test results are as follows. First, a two-way causal flow from CO2e to foreign direct investment and CO2e to gross domestic product per capita confirmed the feedback hypothesis. Second, a one-way causal flow from hydroelectric and renewable electricity generation to gross domestic product per capita supported the energy-led growth hypothesis. Third, the causality test reflected a one-way causal flow from renewable electricity generation to foreign direct investment and hydroelectric generation to foreign direct investment and renewable electricity generation. This study asserts the need for government to introduce taxes and other incentives for solar, wind, and hydropower-related projects. The paper also calls for designing policies to improve the market attractiveness of hydroelectric generation projects through special investment programs.

Potential of renewable energy, agriculture, and financial sector for the economic growth: Evidence from politically free, partly free and not free countries

This study was designed to investigate the role of political stability in the nexus between financial development, renewable energy, total reserves, agriculture value addition, and economic growth from 1995 to 2017 in 100 countries. The long-run causality was confirmed for GDP in politically free countries, which implies that political stability is beneficial for the economy. The GDP had bi-directional causality with financial development and total reserves. The increase in GDP was 0.199% (free countries), 0.097% (partly free countries), and 0.055% (not free countries) for 1% rise in financial development. The renewable energy-led growth hypothesis was confirmed in politically free and partly free countries. The impact of total reserves and renewable energy on GDP was insignificant in politically not free countries. The increase in GDP was 0.024% (free countries) and 0.106% (partly free countries) for 1% rise in total reserves. The economic advantage of agriculture value addition was more in politically not free countries (0.461%) followed by partly free and free countries. The agriculture value addition is required to stimulate the economy and ensure food availability.

Empirical investigation of relationships between energy consumption, industrial production, CO2 emissions, and economic growth: the case of small island states.

This study explores the long-run equilibrium relationship between CO2 emissions, economic growth, and industrial production. In parallel, the energy-led growth hypothesis has been investigated for a selected group of 23 small island states globally chosen from different continents. Data used in the analysis covers the period 1977-2017 on an annual basis and is retrieved from the World Bank open data and national statistical authorities. FMOLS and DOLS panel estimation techniques have been implemented throughout the study, and FMOLS cointegration results reveal that there is a significant and economically sound relationship between industrial production, economic growth, and carbon dioxide emissions among the selected small island nations. Dynamic OLS panel estimation results also provide empirical evidence that industrial production is a significant determining factor for carbon dioxide emissions for the so-called small island states. Vector error correction estimations also provide strong empirical evidence that economic growth causes carbon dioxide emissions with a significant coefficient in the short-run. Panel Granger causality results also indicate that there is a significant bidirectional causal relationship between industrial growth and carbon dioxide emissions among the selected 23 small island states. As a result, the energy-led growth hypothesis for small island states has been validated in this study.

Fiscal policy and CO2 emissions from heterogeneous fuel sources in Thailand: Evidence from multiple structural breaks cointegration test

This study investigated the dynamic linkage between fiscal policy, energy and CO2 emissions from heterogeneous fossil fuel sources in the context of the environmental Kuznets curve (EKC) framework for Thailand. With annual data from 1972 to 2014 while incorporating structural breaks, the study employed a Maki cointegration test and the dynamic ordinary least squares estimation approach. The results found that a 1% increase in fiscal policy brought about a 6.5% (p < 0.05) increase in the low CO2 emitting gaseous fuel sources (natural gas), a 0.2% (p < 0.01) reduction in the intermediate CO2 emitting liquid fuel sources (crude oil derivatives), and an insignificant increase 0.2% (p > 0.05) in the high CO2 emitting solid fuel sources (coal derivatives). While a 1% increase in fiscal policy abates aggregated CO2 emissions by 0.2% (p < 0.05), the existence of the EKC hypothesis was validated in all models. The causality test revealed a bi-directional causal relationship between fiscal policy and CO2 emissions and unidirectional flow from fiscal policy to energy consumption. This confirms that fiscal policy initiatives towards energy consumption have long-run implications for environmental quality. Our findings support the energy-led growth hypothesis for the Thai economy. The implication of the finding is that increasing the share of clean and renewable energy sources should be encouraged—rather than energy conservation policies, which obstruct energy supply and utilization. This highlights a more efficient way of harnessing energy sources through the instrumentality of fiscal policy.

Ecological footprint, urbanization, and energy consumption in South Africa: including the excluded.

The study explores the relationship between ecological footprint, urbanization, and energy consumption by applying the ARDL estimation technique on data spanning 1965-2014 for South Africa. After applying the unit root test that accounts for a break in the data, the Bayer and Hanck (J Time Ser Anal 34:83-95, 2013) combined cointegration test affirms cointegrating relationship among the variables. Findings further reveal that economic growth and financial development exact a deteriorating impact on the environment in the short run. However, the same was not true for both energy use and urbanization. While urbanization and energy use promote environmental quality in the long run, financial development and economic growth degrade it further. The long-run findings of our study are confirmed to be robust as reported by the fully modified OLS (FMOLS), dynamic OLS (DOLS), and the canonical cointegrating regression (CCR) estimates. The direction of causality supports the energy-led growth hypothesis for South Africa. Policy outcomes and directions, and the possibility of promoting sustainable growth without degrading the environment are discussed.

Energy Consumption and Economic Growth in Small Island Economies

Petroleum is the primary source of energy used in transportation and electricity generation for many small Pacific island economies. Noting the growing demand for transportation and infrastructure services, we investigate the long-run association between petroleum consumption and output per worker in Fiji, a small island economy in the Pacific. We use a Cobb-Douglas framework and the ARDL bounds procedure with sample periods from 1980 to 2013. The results show that a 1 % increase in petroleum consumption results in 0.08 % increase in the long run economic growth. The granger non-causality results show that energy consumption causes economic growth, thus confirming energy-led growth hypothesis. The overall results underscore the need for efficient use of energy in general with the impetus to focusing on renewable energy as an important source of economic growth. We argue that energy in whichever form (renewable or non-renewable) is an integral input for economic growth for small island countries in the Pacific. Furthermore, the country is an importer and redistributor of petroleum to other neighbouring islands. The petroleum products comprise of motor gasoline, jet fuel, kerosene, distillate fuel oil, residual fuel oil, and liquefied petroleum gases (LPG). The operations of airlines, ferries, cruise liners and other types of transportation are linked with tourism industry and heavily rely on petroleum. Also, petroleum is used for generating electricity, and the usage increases during the hot and dry season to support the hydro power plants. Considering Fiji as a reference and petroleum as a major type of energy, the study examines the relationship between energy and economic growth, whilst accounting for capital and labour stock, and structural breaks. This study aims to provide impetus to efficient use and management of energy in the Pacific with the overarching aim to promote economic growth and fostering policies to gradually phase out non-renewable energy sources. Key words: petroleum consumption, growth, ARDL bounds approach, causality, structural break, Fiji.

Does environmental quality reflect on national competitiveness? The evidence from EU-15

The European Union has set the target that by 2020 harmful emissions and energy consumption should be reduced by 20% compared to the 1990s. This paper examines the impacts of environmental quality on two parameters of national competitiveness (exports and GDP per capita). The study focuses on the EU-15 countries and covers the period from 1960 to 2013. Even though the analyzed economies are developed countries which are the leaders in environment protection, they are still also the leading emitters of greenhouse gases. The paper uses traditional econometric techniques to test the relations between energy use, CO2 emissions, exports and GDP. The results show that the variables are co-integrated. In addition, energy-led growth hypothesis is valid in most of the analyzed economies. The results have also shown that increased CO2 emissions reduce economic activity and export performance. Finally, we will conclude that there are two tasks for future policy makers: first, to strengthen renewable-energy goals, and second, to adjust the economic structure towards less harmful emissions. In such circumstances, we could expect the economies to further develop clean technologies and to obtain their benefits for national competitiveness.

Another look at the relationship between energy consumption, carbon dioxide emissions, and economic growth in South Africa

This study explores the energy use and economic growth nexus from 1960 to 2016 in South Africa while accounting for capital, labour, and carbon dioxide emissions. We applied Bayer and Hanck (2013) combined co-integration approach, Pesaran et al. (2001) bounds test and Kripfganz and Schneider (2018) critical values and approximate p-values. The empirical evidence finds support for a long-run equilibrium relationship among investigated variables. The Granger causality test indicates one-way causality from energy use to economic growth, validating the energy-led growth hypothesis. Our study found an inverted U-shaped pattern between energy use and economic growth in the long run. This finding suggests that at a higher level of economic development there is less intensification of energy consumption, hence, signifying a decline in energy intensity while validating energy efficiency in South Africa.

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.

Natural Gas Consumption and Economic Growth in Pakistan: Production Function Approach

This study investigates the relationship between energy consumption and economic growth in case of Pakistan using annual data from 1977 to 2013. Using Johansen maximum likelihood approach to estimate the long-run relationship and Granger causality to check the direction of causality, the study finds that the long-run relationship between natural gas consumption and economic growth is positive and statistically significant. Furthermore, the Granger causality shows that there exists energy-led growth hypothesis in Pakistan as Granger causality runs from energy to economic growth. The policy implication is that uninterrupted availability of energy is essential and conservation strategies could be harmful for the economic growth.

Dynamic inter-relationships among tourism, economic growth and energy consumption in India

This study attempts to explore the dynamic causal and inter-relationships among tourism, economic growth and energy consumption in India. This study covers the annual data from 1971 to 2012. This study applies the cointegration and generalised variance decomposition methods to verify the relationship. The bounds testing approach to cointegration and the Gregory–Hansen test for cointegration with structural break consistently reveal that energy consumption, tourism and economic growth in India are cointegrated. We find that tourism and economic growth strongly affects energy consumption in the long-run. Additionally, we also find that tourism and economic growth in India are inter-related, but the causal effect of tourism on economic growth is stronger than the other way around in both the short- and long-run. Therefore, this study concludes that the tourism-led growth hypothesis is valid but the energy-led growth hypothesis is invalid in India. With such findings, we can confirm that tourism is an important catalyst of growth to the Indian economy. Therefore, policy-makers should promote and expand tourism industry in order to sustain the process of economic growth and development in India.

The nexus of ICT, electricity consumption and economic growth in India: an ARDL approach

This study examines both the short-run and long-run relationship among information and communication technology (ICT), economic growth and electricity consumption using annual time-series data for India for the period 1991-2014. All the variables under study are I (1) as per Dickey-Fuller-Generalised least square unit root test results. For cointegration test and causality analysis, we have used autoregressive distributive lag (ARDL) bounds test and vector error correction model (VECM) Granger causality test respectively. ARDL test results suggest that ICT stimulates economic growth in the short-run but not in the long-run, whereas electricity consumption has significant and positive impact on economic growth in the long-run and short-run as well, which supports the energy-led growth hypothesis. However, there is no cointegration when electricity consumption becomes a dependent variable and other variables are independent. Economic growth does not Granger cause electricity consumption in the short-run. These findings suggest that India should focus on ICT expansion to accelerate economic growth in short-run and India should not follow energy conservation policies as it might adversely impact economic growth in both short- and long-run. Instead, India should focus on energy efficient policies. This study has crucial policy implications. Hence, proper balance and coordination among ICT policy, energy policy, and economic growth policy are recommended.

Sustainable Energy Development in Saudi Arabia

The main objective of this research is to study the role of energy consumption in economic growth in Saudi Arabia over the period of 1971–2012 using the autoregressive distributed lag (ARDL) cointegration procedure, and based on neoclassical growth, endogenous growth, and ecological-economics viewpoints. Our empirical results show the existence of a cointegrating relationship between the different variables investigated. In addition, all the inputs (conventional and non-conventional) Granger cause economic growth in both the short and long runs. Our findings confirm the energy-led growth hypothesis in the case of Saudi Arabia. Hence, energy conservation policies may deteriorate economic growth in Saudi Arabia if they are not followed by measures that improve energy efficiency, energy saving technologies and encourage the investment and use of renewable energy sources such as solar and wind energies that can participate in the attenuation of climate changes.

Examined the Energy-Led Growth Hypothesis in India: Evidence from Time Series Analysis

The present study examined the linkage between energy consumption and economic growth in India uses the annual time series data covering the period from 1970-71 to 2011-12. The study used Gross Domestic Product as a proxy for economic growth and energy consumption (oil equivalent per capital). The empirical findings of the study suggest that there is both the short run and the long run relationship exist between energy consumption and economic growth. The Granger causality result confirms that there is unidirectional causality running from economic growth to energy consumption. That means the study support the conservation hypothesis. The impulse response result of the study suggests that India requires an alternative source of energy for faster economic growth. The variance decomposition of the study concluded that the rapid growth of the economy depends on the heavy energy consumption. From the policy recommendation point of view, the energy policy of India should give more importance to find out the alternative source of energy supply in order to meet the growing demand for energy. Moreover, to achieve sustainable energy conservation and macroeconomics stable India should follow the energy efficiency and self-sufficiency in energy production for faster economic growth.

RETRACTED: Questing the three key growth determinants: Energy consumption, foreign direct investment and financial development in South Asia

The relationship between energy led growth, foreign direct investment (FDI) led growth and financial development led growth hypothesis has been widely debated inside the academic circles. There is a general consensus that these factors are a major cause of growth and vice versa. The objective of this study is to analyze the causal relationship among energy consumption, economic growth, relative price, financial development (FD) and foreign direct investment (FDI) in South Asia using a bivariate and multivariate framework. This study covers a sample from 1975 to 2011. The results of cointegration suggests that variables are cointegrated at their first order i.e, I(1) variables and there has been long-run relationship exist between them. The study finds that both energy consumption and economic growth Granger causes each other in the short and long run. The study supported five growth hypotheses in the context of South Asia and these hypotheses have important policy implications in the South Asian region i.e., a) energy led growth hypothesis, b) energy led financial development, c) FDI led growth hypothesis, d) finance led growth hypothesis and e) FDI led relative prices are supported by the findings from this study. The finding of bidirectional Granger causality between energy consumption and economic growth implies that South Asia is an energy dependent country. Energy is a prominent resource for financial sector development in South Asia, further developed financial sector need more energy resources, and this result indicates that energy consumption Granger cause FD and FD Granger cause energy consumption in South Asian region. Moreover, there is a bidirectional link between FDI & economic growth; and between FDI & relative prices of energy in South Asia which explains that FDI increases energy prices in the host countries, whereas brighter growth prospects in the host countries attract an increased flow of FDI in this region. Finally, existing energy infrastructure fails to comply with speedy FDI and thus put strain on the energy channels which leads to higher energy prices. This quest supports the FDI led relative price hypothesis in South Asian region.

Is the energy-led growth hypothesis valid? New evidence from a sample of 85 countries

The energy-growth literature contains a large number of discussions on the causal relationship between energy consumption and economic growth. The central debate focuses on whether energy consumption contributes or not to economic growth since it has direct implications for the formulation of strategic policies. Nevertheless, current studies cannot provide a conclusive suggestion due to mixed causality results. This inconclusive evidence is potentially attributed to model specifications and the stage of economic development of the countries under investigation. Hence, this study attempts to empirically re-investigate the validity of the energy-led growth hypothesis using a different model specification and different stages of economic development for 85 selected countries around the globe. Overall, although the causality results are mixed among countries, we do find a systematic pattern. In particular, Granger causality models with three and four variables are more likely to support the hypothesis compared to their counterparts that contain only two variables. In addition, both developed and developing countries are more likely to support the energy-led growth hypothesis compared to the less developed or low income countries. Therefore, causality results are very sensitive to the choice of the model specification along with the stages of economic development. Finally, energy conservation policies should only focus on low income countries as these policies may not retard the process of economic growth.