Existence Of Long-run Relationship Research Articles

Nexus between infrastructural development and economic growth: Evidence from Bangladesh through auto-regressive distributive lag and nonlinear auto regressive distributive lag analysis

This study aims to scrutinize the influence of infrastructure on the economic growth of Bangladesh, employing an extensive time series analysis spanning from 1973 to 2020. Utilizing Principle Component Analysis, two distinct indices were constructed to gauge the dimensions of economic and social infrastructure. Subsequently, Auto-Regressive Distributive Lag (ARDL) and Nonlinear Auto Regressive Distributive Lag (NARDL) bound tests were employed to assess the existence of long-run relationships among the variables under examination. The findings indicate a significant and positive contribution of economic infrastructure to both long and short-term production expansion. Upon further disaggregation into negative and positive shocks, consistent results emerge. An increase (decrease) in the economic infrastructure (EI) index by one unit corresponds to an upsurge (subside) of 0.16% (0.17%) in economic growth. In contrast, social infrastructure (SI) exhibits no significant long-run association with GDP growth. The discerned pattern suggests that EI play a pivotal role in driving aggregate output, while SI display a lag. Despite this, it is imperative to underscore the importance of SI for human development. Consequently, adopting a comprehensive and strategic approach, encompassing vision, ensuring quality inclusivity, and anti-corruption measures, is imperative for Bangladesh to fully realize the transformative potential of its infrastructure investments and foster sustained economic growth.

Fiscal policy, interest rate and the manufacturing sector performance in Nigeria

In this paper, the influence of fiscal policy (government expenditure and taxation) and interest rate on the manufacturing sector of the Nigerian economy was explored for the period 1981 to 2021. The study utilized the autoregressive distributed lag (ARDL) model approach since some of our variables were integrated at level and others at first difference, and the bounds test reporting the existence of long run relationship in the model. Findings of the study indicated that in the short run, government expenditure and its one-period lag exerted a negative and significant influence on manufacturing sector performance; value added tax exerted a positive and significant effect on manufacturing sector performance while its one-period lag exerted a negative and significant effect; and interest rate exerted a positive and significant effect on manufacturing sector performance. In the long run, government expenditure put forth a negative but insignificant effect on manufacturing sector performance; while value added tax and interest rate exert positive and significant effect. In the disaggregated model, recurrent expenditure exerts a negative and significant effect; capital expenditure exerted a positive and significant effect; value added tax exerted a negative and significant effect; and interest rate put forth a positive and significant influence on manufacturing sector performance. The study recommended that there is need for a reduction in the cost of governance as a huge proportion of public spending is used in running the government other than being utilized in stirring critical sectors that could stir manufacturing sector performance.

Foreign Direct Investment, Energy Consumption and Greenhouse Gas Emissions in Nigeria

This paper investigated the nature of the relationship that exists between foreign direct investment, energy consumption, and greenhouse gas emissions in Nigeria between 1990 and 2020. The investigation was done using the ARDL method of analysis. The bounds cointegration test found the existence of long run relationship among the variables. The long run estimation result showed that foreign direct investment in Nigeria has a negatively significant impact on greenhouse gas emission in the short run and long run. The result also shows that AGO consumption has a negatively insignificant impact on greenhouse gas emission in the short run and long run. While PMS consumption has a positively significant impact on greenhouse gas emission in the long run. The model goes on to propose the use of government policies that would promote FDI investment in Nigeria and a more business friendly environment

The Impact of Government Expenditure on Industrial Sector Productivity in Tanzania

This study examines the impact of government expenditure on industrial sector productivity in Tanzania. The analysis was based on secondary annual time series data. Using data from 1980 to 2011, the study employs the Auto Regressive Distributed Lag (ARDL) bounds testing approach cointegration to examine the existence of long-run relationships and the error correction model (ECM) for the short-run relationships. All variables involved are integrated of order one while the error correction model estimates indicate the existence of a long-run relationship between government expenditure and the industrial sector productivity. Granger causality pair-wise test was conducted in determining the relationship among the variables. Analytical results show the existence of positive causality; therefore, government expenditure has significant impact on the industrial sector productivity. From a policy point of view, the focus should be on the government to adopt fiscal policy instruments with significant impact on industrial sector productivity.

AN ARDL ANALYSIS ON THE EFFECT OF OIL PRICE INSTABILITY ON FOREIGN RESERVE IN NIGERIA (2015-2022)

The paper employed auto regressive distributive lag (ARDL) model to examine the effect of oil price instability on foreign reserve in Nigeria using recent monthly time series data over the period of 2015-2022. The results of ARDL Bound cointegration indicated a presence of cointegration in the model which confirms an existence of long run relationship between oil price instability and foreign reserve. The findings of ARDL long run analysis show that oil price instability have negative and significant effect on foreign reserve. Likewise, inflation rate has a negative and significant effect on foreign reserve. On the other hand, oil revenue is found to have a positive and significant effect on foreign reserve. Furthermore, the ARDL short run estimates indicate that an existence of a short run relationship between oil prices and foreign reserve. From the findings, the coefficient of error correction term indicates that about 30% of the discrepancy between the actual and the long run or equilibrium value of foreign reserve is corrected or eliminated each month. Furthermore, the results of granger causality test indicate a unidirectional causality between oil price instability and foreign reserve. Based on the empirical findings, the paper suggests the need for the policy makers to adopt policy framework that will get rid of corruption and ensure macroeconomic stability. Policymakers should also take steps to mitigate the negative effects of oil price fluctuations on foreign reserve in Nigeria.

Exploring the impact of natural Resource utilization on human capital development: A sustainable development perspective

The COVID-19 pandemic has had a profound impact on societies worldwide, highlighting the need for sustainable development practices. This study focuses on the N-11 countries, aiming to investigate the influence of coal rent, oil rent and mineral rent on human capital by controlling the role of economic growth and financial development from 1990 to 2021. The study analysis begins by conducting preliminary tests to address cross-section dependency, slope heterogeneity, unit root, and cointegration to ensure robust and accurate findings. The study employed the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) techniques for the panel data analysis. The LM cointegration method results reveal the existence of long-run relationship among the study variables. These test findings revealed that natural coal rent, oil rent and mineral rent are positively and significantly associated with human capital. We observe that economic growth and financial development also helpful to increase the human development level in these group of countries. Based on these finding, this study suggests different policy implication for these group of countries which will help policymakers to reach on consensus. Exploring the impact of natural resource utilization on human capital development from a sustainable development perspective during COVID-19 highlights the need for informed policy decisions. By considering the economic, social, and environmental dimensions, policymakers can create a resilient and sustainable future. Integrating sustainable development principles, embracing technology and innovation, and fostering international cooperation are essential to ensure a positive impact on human capital development in the face of resource utilization challenges.

Analysis of the Relationship between Interest Rate, Exchange Rate and Economic Growth in Nigeria

This study analyses the relationship between interest rate, exchange rate and economic growth in Nigeria spanning from 1980-2022. Data for the study were obtained from World Development Indicators. The study undertook unit root test using the Augmented Dickey Fuller (ADF) method. Consequently, based on the outcome of the ADF result, the research used Auto-regressive Distributive Lag (ARDL) model to determine the existence of a long-run interactive relationship between interest rate, exchange rate, and economic growth in Nigeria. The Auto-regressive distributive Lag (ARDL) bound test result of the long-run interactive relationship between the variables reported the existence of long-run relationship. The study further revealed that the interaction between real interest rate and exchange rate on growth of gross domestic product is negative, but statistically significant both in the long-run and previous period of the short-run. Similarly, the interaction between lending interest rate and exchange rate is negatively related with growth of gross domestic in the long-run. However, deposit interest rate and exchange rate recounted a positive but insignificant interactive relationship. It has been suggested, among other recommendations, that the Central Bank of Nigeria (CBN), should raise deposit interest rate in order to incentivize individuals to save a greater portion of their income. This will enable financial institutions to enhance their capacity to allocate more cash towards investment, thereby fostering economic growth.

Analysis of Fishery and Forestry Ventures and Poverty Reduction in Nigeria

Fishery and forestry ventures are sub-sectors of agriculture with the potential for poverty reduction through employment creation, value addition, and improvement in export earnings. Nevertheless, they have received relatively less attention from all levels of government in Nigeria. This paper examined the effect of fishery and forestry ventures on poverty reduction in Nigeria between 1976 and 2022. Ex-post facto research design was adopted. Data were sourced from CBN annual statistical bulletin, the National Bureau of Statistics, publications of the World Bank, as the Federal Ministry of Agriculture and Rural Development. NARDL was adopted for data analysis. Phillip-Peron Unit root tests revealed a uniform order of integration, while Co-integration Bounds test revealed no existence of long-run relationship between the fishery and forestry ventures and poverty reduction. Findings revealed that agricultural production in fishery and forestry has no significant long-run nexus with poverty reduction in Nigeria. The paper recommended that the Federal Department of Fisheries should engage reputable research institutes and colleges in the fishery industry in Nigeria to train and retrain participants in the sub-sectors to provide skilled workforce in the development of sustainable fishery production towards poverty reduction in Nigeria. The paper also recommended that regulatory agencies in the forestry sub-sector in Nigeria appoint more supervisors and enforcement officers to ensure adequate regulation of the industry towards adding maximum economic value to the exploration and exploitation of the forestry resources in Nigeria by reducing leakages and ensuring that adequate taxes and levies are paid including collection of relevant penalties from defaulters in order to attain sustainable income generation and poverty reduction among the accredited participants.

Human Capital Development and Economic Growth: Evidence from Nigeria

This study examined the impact of human capital development on economic growth in Nigeria from 1981 to 2021using the autoregressive distributed lag (ARDL) method. Annual time series data on the dependent variable, real gross domestic product growth rate (RGDPG), alongside the independent variables, including government expenditure on education, government expenditure on health as well as gross fixed capital formation were sourced and collected from Central Bank of Nigeria [1] Statistical Bulletin, while the annual time series data on primary, secondary and tertiary school enrolments were collected from UNESCO [2] Institute for Statistics. The series were tested for stationarity using the Augmented Dickey Fuller (ADF) unit root test. The result showed a mix of variables integrated of order one, I(1) and of order zero, I(0). The Bounds test for cointegration showed the existence of long run relationship amongst the variables as the F-statistic value of approximately 3.43 was found to be higher than the 5% upper bounds value of 3.28. The results of the ARDL method of analysis revealed that in the long run, government expenditure on education and tertiary school enrolment had insignificant negative impact on economic growth while government expenditure on health, gross fixed capital formation, primary and secondary school enrolments had insignificant positive impacts on economic growth. On the other hand, in the short run, while government expenditure on education exhibited significant negative impact on economic growth, government expenditure on health had significant positive impact on economic growth. Gross fixed capital formation impacted positively on economic growth, primary school enrolment had negative impact while secondary and tertiary enrolments had positive impact on economic growth. Consequently, the study recommended among others that the government should set incremental annual targets expenditure on health aimed at achieving the Abuja agreement of 15% of total public expenditure in the health sector. This will create multiplier effect in the long run and serve as a boost to economic growth in the country.

Impact of Foreign Loan on Economic Growth of Pakistan: A Time Series Analysis

This study examines effect of foreign loan on economic growth in Pakistan. The study uses time series data for the period of 1972-2022 and collects data from Economic Survey of Pakistan, SBP and WDI. ADF test results shows that variable inflation is stationary at level, while gross domestic product growth rate, foreign loan, and FDI are stationary at 1st difference. So, the study uses ARDL approach to detect the relationship between variables because integration order mixed. The ARDL model results shows that there is existence of long run relationship among all variables. The study results show that foreign loan has negative, FDI has positive, and inflation has negative effect on economic growth of Pakistan. This study recommends that Pakistan should overcome foreign loan and give friendly environment to foreign investors so that more and more FDI comes to country, that will help to improve economic growth of Pakistan.

Tax policy and economic growth: Evidence from Ghana

The government of Ghana implemented an Economic Recovery Program (ERP) in 1983, aimed at the restoration of fiscal discipline towards increasing revenue and promoting economic growth. In spite of the fiscal reforms’ growth in tax, revenue continues to lag behind that of government expenditure and compares poorly with revenue performance in other parts of the world. Economic growth in the country also settled around 5 per cent level for two decades after the introduction of the fiscal reforms. This paper examined the effect of tax policy measures on economic growth and explored the tax revenue threshold that optimizes economic growth using time series data for the period 1970 - 2020. The data sets involve GDP per capita, stock of human capital, physical capital, growth rate of working population, and six (6) tax indicators namely: import duty, excise tax, company tax, personal income tax, income and property tax, and value added tax. The results of the unit root test reveal that all the variables are stationary at levels and first difference. The bounds test signals the existence of long run relationship among the variables at 1 per cent level of significance. Employing the Autoregressive Distributed- Lag technique, the findings suggested that economic growth benefits from increases in import taxes and company taxes more than the other types of taxes both in the short and long run. However, increases in the share of value added taxes and personal income taxes were found to have deleterious effect on economic growth in Ghana. A threshold level of 14.48 per cent of tax revenue - GDP ratio was found to be optimal level of taxes that impact economic growth. The study recommends that broadening, nurturing and sustaining tax base should be the utmost target of policy to ensure significant increase in the total government revenue to promote economic growth.

Foreign Exchange Rates Dynamics and Stock Market Performance in an Emerging Economy: Evidence from Nigeria

This study focused on the connection between foreign exchange rates dynamics and stock market performance in Nigeria (1995 to 2021). The paper set out to examine the effects of foreign exchange rates movements on the stock market performance in Nigeria. The data for the study were obtained solely from the Central Bank of Nigeria statistical bulletin. The Naira-U.S Dollar, Naira-British Pounds, Naira-Euro, and Naira-Swiss Franc exchange rates were proxies for the foreign exchange rate dynamics, while stock market performance was represented by stock market capitalization. The vector error correction mechanism (VECM) and the Pairwise Granger Causality tests were employed to analyze the secondary data. Results revealed the existence of long run relationship between foreign exchange rate dynamics and stock market performances in Nigeria though with an insignificant impact. In addition, a uni-directional causality was observed running from market capitalization to naira US-dollar exchange rate among others. It was therefore concluded that foreign exchange rates dynamics have an insignificant impact on stock market performances in Nigeria. Thus, there is need to align Nigeria’s economic stabilization policies in order to effectively achieve currency stability (of the naira). Policies such as outright ban on importation of items that can be produced locally should be pursued vigorously. This will no doubt boost aggregate domestic demand for such products and also go a long way in enhancing the value of the naira and by extension stock market outlook in Nigeria.

Comparison Of Autoregressive Distributed Lag Model And Vector Error Correction Model Analysis On The Effect Of Some Macroeconomic Variables On Gdp In Nigeria

This research work employed Autoregressive distributed lag (ARDL) and Bound Test for co-integration with Vector Error Correction (VEC) Models for estimation of long run and short run effect on Gross Domestic Product (GDP) in Nigeria. In order to achieve this, annual data on GDP, Unemployment, Exchange, and Interest rate from 1980-2017 The Augmented Dickey Fuller (ADF) Test revealed that the variables are stationary at first difference .ARDL and bound test for co-integration revealed that the decision whether to accept or reject either of the hypotheses is inconclusive. Johansen confirmed the existence of long run relationship between the variables. VECM long run estimate indicated that there is positive and significant effect of Exchange rate and Unemployment rate on GDP while Interest rate had negative significance effect on GDP.ARDL long run estimate indicated that only Unemployment rate had significant effect on GDP. ARDL short run estimate among the variables revealed that the coefficient of the ECM(-1) had a correct sign and statistically significant at 5% level which also indicated that the system corrects its previous period at the speed of adjustment by 46% per annum, it was also revealed that interest rate was positive and statistically significant in the short run . While VEC short run estimate revealed that no any variable has significant effect on GDP and that the coefficient of the ECM(-1) had a correct sign and was statistically not significant at 5% level which also indicated that the system had its previous period correct at the speed of adjustment by 12% per annum,. The models were stable for forecasting, no serial correlation, multicollinearity, heteroskedasticity and the residuals are normally distributed

Investigating the relationship between market value added (MVA) and economic value-added momentum (EVAM): empirical evidence from Turkiye

Purpose- This study aims to investigate the possible relationship between market value added (MVA) and economic value-added momentum (EVAM). Besides, any possible linkage between leverage (in terms of the degree of combined leverage) and market value added is also tested. Methodology- This study conducts a time series analysis to the quarterly data of manufacturing industry, comprising Borsa Istanbul (BIST) listed manufacturing firms for the period of 2001.q2-2022.q4 to test MVA-EVAM relationship. It employs autoregressive distributed lag (ARDL) bounds testing approach, developed firstly by Pesaran and Shin (1999) and further revised by Pesaran, Smith and Shin (2001). The stationarity of the series is tested by the Augmented Dickey-Fuller (ADF) and Phillips and Perron (PP) unit root tests. Findings- Empirical findings from ARDL bounds testing approach refers the existence of long-run relationships between market value added and economic value added momentum; and market value added and degree of total leverage. The coefficients of the long-run form of ARDL model reveal that both economic value-added momentum and degree of combined leverage have statistically significant and negative effects on market value added. The estimated short-run coefficients indicate that economic value added momentum has significantly negative effect on market value added created as similar to the long-run finding. Another finding is that though leverage has significantly positive effect on market value added in the short-run, this positive effect turns out to be negative in lag one period. Conclusion- This study contributes to the literature on MVA-EVA relationship by employing autoregressive ARDL bounds testing approach to manufacturing industry comprising Borsa Istanbul (BIST) listed manufacturing firms of Turkey as an emerging market. Besides, the research model includes EVAM -as an independent variable- that is so rarely considered in existing literature. Keywords: Market value-added, economic value-added momentum, leverage, time series analysis, ARDL bounds testing approach. JEL Codes: G32, C32, C58

Effects of Humanitarian Aids on the Economic of Nigerian

This research investigates the impact of Humanitarian Aids on the Nigerian economy. The Data for the work were obtained from the United Nation Office for the Coordination of Humanitarian Affairs (OCHA), Nigerian Humanitarian Found (NHF) and World Bank Data spanning for the period (2014-2021) reports. The simple linear Regression analysis method was used in order to analyse data after testing the unit root and cointegration. The unit root test indicates that the variables are stationary at second difference which necessitates the conduct of cointegration test. Trace statistics indicate one cointegration which proves the existence of long run relationship among the variable. The major objective of the study is to find out if humanitarian aids significantly affect the economic growth and the question that raises is if humanitarian aids significantly affect the economy in Nigeria and how can government effectively and efficiently utilise the opportunities of humanitarian aids toward economic development of the country. The study recommends that government should provide some funds in order to assist in financing humanitarian projects under the supervision of United Nation the Office for the Coordination of Humanitarian Affairs and Nigerian Humanitarian Found in order to improve their performance of responding to the most pressing or critical emergencies within and outside the country. The study concludes that there is a positive significant relationship between the inflow of foreign aids and the value of the country Gross Domestic Product.

Determinants of Inflation in Ethiopia: Autoregressive Distributed Lag Model

Price stability is one of the major goals of monetary policy and the key indicators of macroeconomic stability. Pursuing of price stability is primary to long-run growth and development; it should be the concern of every economy. This study examine the factors in determining inflation in Ethiopia, using the autoregressive distributed lag (ARDL) model by employing the data series for the period ranging from 1974 to 2017. The ADF Unit root test confirmed that the variables in the model are integrated of order 0 I (0) and order one I (1)). The Bound F-test of co integration has confirmed the existence of long run relationships among the variables entered in the inflation model. ARDL regression result suggest that real gross domestic product, real effective exchange rate and budget deficit variables are important in determining inflation in the short run. In the long run inflation is determined by real effective exchange rate, budget deficit, gross national saving and lending interest rate. The error correction term coefficient is negative and significant at 1 percent level of significance suggesting that inflation adjusts to deviations from its long -term equilibrium. The estimated model passes diagnostic tests and the graphical evidence (CUSUM and CUSUMQ graphs) indicate that the model is stable during the sample period. Finally, investments in food and agricultural sectors could considerably support the process of ensuring price stability. Moreover, a credible and sustained fiscal adjustment, aiming to boost revenue generation can reduce fiscal deficit.

Foreign Trade, Employment and Economic Growth in Sudan: Econometric Analysis

This study investigates the relationships between foreign trade, employment and economic growth in Sudan over the period 1970-2017, with inflation and budget deficit as policy variables. Two autoregressive distributed lags (ARDL) models were estimated with trade and economic growth as determinants of youth employment and total employment. Two other models were estimated to investigate how trade and each type of employment affect economic growth separately. The empirical results from the four models revealed existence of long run relationships between foreign trade, employment and economic growth. In the short run, trade, economic and population growth rates have stronger effects on youth employment than on total employment. In the long run, youth employment is found to be positively affected by economic growth and investment but negatively affected by population growth and the budget deficit, while total employment is only affected by population growth rate. Economic growth is found to be much explained by youth employment than by total employment and foreign trade. The study concludes that the internal factors in terms of inflation, budget deficit, investment and salaried workers are more important to employment and economic growth than the performance of foreign trade sector of Sudan. The policy implication is that youth employment should be given priority in labor and trade openness policy than targeting employment as a whole. For trade openness to play positive roles on employment and economic growth in Sudan, corrective policies for volumes and types of exports and imports are urgently needed.

Impacts of Climate Change and Population Growth on Food Security in Nigeria

Food production in Nigeria has not matched with the rate of population growth leading to reduction of national food independence and self-reliance. As a result, Nigeria is facing serious food insecurity. Therefore, this research examined the impacts of climate change and population growth on food security in Nigeria. Annual time-series of food security (proxy of food production index), annual rainfall, annual temperature, population growth rate, urban population rate and agricultural land used from 1980 to 2019 were used. The research used Augmented Dickey-Fuller (ADF) unit root test, Vector Autoregressive (VAR) model, Johansen Cointegration test and Vector Error Correlation Models (VECM) were used to analyze the data. ADF unit root test result shows that all variables were completely stationary at the first different orders I(1) at both at intercept and intercept with trend at level of significance of 1%. Three (3) lags were conclusively selects as the optimum lag in the VAR model. The result of the estimation indicates that the Johansen cointegration shows an existence of long-run relationship among the variables used in the study. The result of the VECM estimation shows that rainfall, temperatures, population growth rate and agricultural land used were negatively significantly related to food security at various levels of significance (1%, 5% and 10%). At the long-run all the variables were adversely related to food security in Nigeria. The coefficient of multiple determinations (R2) indicates about 91%, the adjusted R2 of 0.86 was obtained and Durbin-Watson of 2.1 was obtained which implies that the tools were good fit to estimates the data. Decomposition of variance shows dwindling in food security. The research therefore recommends public enlightenment campaign on birth control; and appropriate climate change adaptation methods should be adopted to enhance food security in Nigeria among others.

Private Investment and Economic Performance in Nigeria

This study examines the impact of private investment on economic performance in Nigeria using time series data from 1980 -2018. Multiple regression and co-integration methods are employed to analyze the data. The objectives of this study is to, among other things, examine the casual relationship between private investment and economic growth in Nigeria and to investigate the impact of private domestic investment on economic performance in Nigeria. Being a time series data, the first step is to test for the stationarity of the data by using Phillips Perron-Fuller unit root test. Ordinary least square (OLS) and Auto regressive distributed lag (ARDL) technique is used to estimate the models. The results of the unit root test show that some variables; Labour Force Participation rate (LPR), Private Domestic Investment (PDI),Foreign Direct investment (FDI), Misery Rate (MR), Private Investment (PI), Exchange Rate (EXR), Unemployment Rate (UNEM) and Trade Openness (TOP) are integrated of order one (1) while two variables; Real Gross Domestic Product Growth Rate (RGDPR) and Real Interest Rate ( RINTR) are integrated of order zero (0). The findings from the analysis using the Ordinary Least Square (OLS) and Auto Regressive Distributed Lag (ARDL) methods show the following: that there is no causal relationship between private investment and economic performance in Nigeria. Private Domestic Investment (PDI) recorded a positive but insignificant impact on economic performance (RGDPR) both in the short run and long run; unemployment rate reveal a negative but insignificant impact on economic performance (RGDPR) in the short run but the impact is statistically significant in the long run. There is no long run significant impact of Foreign Direct Investment (FDI) on economic performance in Nigeria, Trade Openness showed a significant inverse relationship with Misery Rate which was proxy for economic performance. The co-integration tests also confirm the existence of long run relationship between the variables and results gotten from stationarity and normality test reveal that the model is fairly well specified and could be used for policy analysis. Based on these findings, the study recommends that the AKSU Journal of Social Sciences (AJSS) Vol. 3, No. 1 (April) 2023 – G. M. Ekpo, E. B. Iwatt & A. A. Uduimoh, pp. 55-85 58 Nigerian government should promote and encourage both domestic and foreign direct investment. The investment policy should be more transparent, attractive and competitive.

The need for energy efficiency and economic prosperity in a sustainable environment

Energy efficiency accounts for approximately 40% of the possibility of reducing greenhouse gases. Mitigating climate change while maintaining economic growth is a critical challenge. We investigated the impact of energy efficiency on economic growth and environmental sustainability in the ten most energy-efficient countries from 1990 to 2019, using energy access, energy security, and energy depletion as moderator variables. To this aim, a thorough empirical analysis was performed, and advanced econometric techniques were employed. The Westerlund panel co-integration test results indicate the existence of long-run relationships within the variables considered. Specifically, findings show that energy intensity, access, and security were positively associated with CO2 emissions, ecological footprint, and economic growth. At the same time, energy depletion was negatively associated with economic growth and positively related to CO2 emissions and ecological footprint. These findings demonstrate that energy intensity, access, and security positively impact economic growth and degrade the environment. This empirical evidence suggests that economies should simultaneously achieve economic and environmental goals by decoupling energy consumption from economic growth, which can be accomplished through improvements in energy efficiency.