Energy-growth nexus for ‘Renewable Energy Country Attractiveness Index’ countries: Evidence from new econometric methods

Abstract

This study explores the connections between renewable energy consumption (REC), non-renewable energy consumption (NREC), gross fixed capital formation (GFCF), the labor force (LF), and economic growth (GDP) in Renewable Energy Country Attractiveness Index (RECAI) countries for 1991–2016. We quantify the nexus between REC, NREC, and GDP while utilizing a production model framework and including the measures of labor and capital, for suggesting a phase-wise strategy to attain the sustainable development goals. We use robust methodologies including Lagrange Multiplier (LM) panel unit root tests with trend shifts, Westerlund cointegration test, LM bootstrap technique for cointegration with breaks, continuously updated fully modified (CUP-FM) and continuously updated bias-corrected (CUP-BC) estimators, Augmented Mean Group (AMG) approach, fully modified ordinary least squares, dynamic ordinary least squares, Canonical Cointegrating Regression (CCR), and panel causality test proposed by Canning & Pedroni. We compute non-parametric time-varying coefficients with fixed effects for seeing the impact of GFCF, LF, REC, and NREC on GDP. Our results press upon policymakers to shift toward clean energy and REC for attaining the environmental goals (SDGs 6, 7, 13, and 15) and the economic goals (SDGs 1, 2, 8, and 10). While this shift would help developed economies, which have already attained the economic goals, to progress on the front of environmental goals, it would enable developing countries to progress on both fronts in a balanced manner.

Keywords

RECAI / Renewable Energy Country Attractiveness Index / GFCF / Gross Fixed Capital Formation / LF / Labour Force / GDP / Gross Domestic Product / ARDL / Autoregressive Distributed Lag / SDGs / Sustainable Development Goals / EKC / Environmental Kuznets Curve / FMOLS / Fully Modified Ordinary Least Squares / DOLS / Dynamic Ordinary Least Squares / CCR / Canonical Cointegration Regression / VECM / Vector Error-Correction Model / CADF / Cross-sectionally Augmented Dickey-Fuller / CIPS / Cross-sectionally augmented Im, Pesaran and Shin / WDI / World Development Indicators / REC / Renewable Energy Consumption / NREC / Non-Renewable Energy Consumption / EIA / U.S. Energy Information Administration / CD / Cross-Sectional Dependence Test

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