IDEAS home Printed from https://ideas.repec.org/a/eee/rensus/v75y2017icp1130-1141.html
   My bibliography  Save this article

Impacts of renewable energy consumption on the German economic growth: Evidence from combined cointegration test

Author

Listed:
  • Rafindadi, Abdulkadir Abdulrashid
  • Ozturk, Ilhan

Abstract

Germany is the largest economy in Europe and the leading renewable energy user comparable to none in the entire of the European continents. It is in reference to these developments that this study investigates whether the impacts of renewable energy have consolidated the economic growth prospects of the country. To ensure this, quarterly time series data from 1971Q1 to 2013QIV was used. The study employed the Clemente-Montanes-Reyes detrended structural break test, the Bayer-Hanck combined cointegration test and the ARDL bounds testing approach to cointegration. In addition, the causality analysis was observed using VECM Granger causality framework. The results confirmed the existence of cointegration among the variables. The results show that renewable energy consumption in Germany consolidates the country's economic growth prospects to the extend that a 1% increase in renewable energy consumption boosts German economic growth by 0.2194%. In addition to that, a 1% increase in capital lead to the rise in economic growth by 1.1320%. While a 0.5125% increase in economic growth is due to 1% increase in labor productivity. The causality analysis on the other hand, revealed the existence of feedback effect between renewable energy consumption and economic growth. While the relationship between renewable energy consumption and capital is found to be bidirectional and same inference was found to exist between capital and economic growth. The study proposes solid mechanisms that will help in averting renewable energy market failure locally and internationally among others.

Suggested Citation

  • Rafindadi, Abdulkadir Abdulrashid & Ozturk, Ilhan, 2017. "Impacts of renewable energy consumption on the German economic growth: Evidence from combined cointegration test," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 1130-1141.
  • Handle: RePEc:eee:rensus:v:75:y:2017:i:c:p:1130-1141
    DOI: 10.1016/j.rser.2016.11.093
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1364032116308541
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Halicioglu, Ferda, 2009. "An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey," Energy Policy, Elsevier, vol. 37(3), pages 1156-1164, March.
    2. Shahbaz, Muhammad & Khan, Saleheen & Tahir, Mohammad Iqbal, 2013. "The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis," Energy Economics, Elsevier, vol. 40(C), pages 8-21.
    3. Zhang, Yue-Jun & Da, Ya-Bin, 2015. "The decomposition of energy-related carbon emission and its decoupling with economic growth in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1255-1266.
    4. Woo, Chungwon & Chung, Yanghon & Chun, Dongphil & Seo, Hangyeol & Hong, Sungjun, 2015. "The static and dynamic environmental efficiency of renewable energy: A Malmquist index analysis of OECD countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 367-376.
    5. Zhang, Yue-Jun, 2011. "Interpreting the dynamic nexus between energy consumption and economic growth: Empirical evidence from Russia," Energy Policy, Elsevier, vol. 39(5), pages 2265-2272, May.
    6. Mehdi Ben Jebli & Slim Ben Youssef & Ilhan Ozturk, 2015. "The Role of Renewable Energy Consumption and Trade: Environmental Kuznets Curve Analysis for Sub-Saharan Africa Countries," African Development Review, African Development Bank, vol. 27(3), pages 288-300, September.
    7. Abdulkadir Abdulrashid Rafindadi & Zarinah Yusof, 2014. "Are the Periods of Currency Collapse an Impediment to Entrepreneurship and Entrepreneurial Haven? Evidence from Regional Comparison," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 886-908.
    8. Rafindadi, Abdulkadir Abdulrashid & Ozturk, Ilhan, 2016. "Effects of financial development, economic growth and trade on electricity consumption: Evidence from post-Fukushima Japan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 1073-1084.
    9. Abdulkadir Abdulrashid Rafindadi, 2015. "Econometric Prediction on the Effects of Financial Development and Trade Openness on the German Energy Consumption: A Startling Revelation," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 182-196.
    10. Magnani, Natalia & Vaona, Andrea, 2013. "Regional spillover effects of renewable energy generation in Italy," Energy Policy, Elsevier, vol. 56(C), pages 663-671.
    11. Abdmouleh, Zeineb & Alammari, Rashid A.M. & Gastli, Adel, 2015. "Review of policies encouraging renewable energy integration & best practices," Renewable and Sustainable Energy Reviews, Elsevier, vol. 45(C), pages 249-262.
    12. Rafindadi, Abdulkadir Abdulrashid, 2016. "Revisiting the concept of environmental Kuznets curve in period of energy disaster and deteriorating income: Empirical evidence from Japan," Energy Policy, Elsevier, vol. 94(C), pages 274-284.
    13. Abdulkadir Abdulrashid Rafindadi & Zarinah Yusof, 2013. "Revisiting the Contention of the FD/GDP Nexus of the Northern Sudanese Economy: A New Startling Empirical Result," Abstract of Economic, Finance and Management Outlook, Conscientia Beam, vol. 1, pages 1-6.
    14. Schill, Wolf-Peter, 2014. "Residual load, renewable surplus generation and storage requirements in Germany," Energy Policy, Elsevier, vol. 73(C), pages 65-79.
    15. Jenssen, Till & König, Andreas & Eltrop, Ludger, 2014. "Bioenergy villages in Germany: Bringing a low carbon energy supply for rural areas into practice," Renewable Energy, Elsevier, vol. 61(C), pages 74-80.
    16. Anis Omri & Anissa Chaibi, 2014. "Nuclear energy, renewable energy, and economic growth in developed and developing countries : A modelling analysis from simultaneous-equation models," Working Papers 2014-188, Department of Research, Ipag Business School.
    17. Schaffer, Lena Maria & Bernauer, Thomas, 2014. "Explaining government choices for promoting renewable energy," Energy Policy, Elsevier, vol. 68(C), pages 15-27.
    18. Komal, Rabia & Abbas, Faisal, 2015. "Linking financial development, economic growth and energy consumption in Pakistan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 44(C), pages 211-220.
    19. Pesavento, Elena, 2004. "Analytical evaluation of the power of tests for the absence of cointegration," Journal of Econometrics, Elsevier, vol. 122(2), pages 349-384, October.
    20. Shaaban, Mohamed & Petinrin, J.O., 2014. "Renewable energy potentials in Nigeria: Meeting rural energy needs," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 72-84.
    21. Menegaki, Angeliki N. & Ozturk, Ilhan, 2013. "Growth and energy nexus in Europe revisited: Evidence from a fixed effects political economy model," Energy Policy, Elsevier, vol. 61(C), pages 881-887.
    22. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    23. Ketterer, Janina C., 2014. "The impact of wind power generation on the electricity price in Germany," Energy Economics, Elsevier, vol. 44(C), pages 270-280.
    24. Abdulkadir Abdulrashid Rafindadi & Zarinah Yusof, 2014. "An Econometric Estimation and Prediction of the Effects of Nominal Devaluation on Real Devaluation: Does the Marshal-Lerner (M-L) Assumptions Fits in Nigeria?," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 819-835.
    25. Creutzig, Felix & Goldschmidt, Jan Christoph & Lehmann, Paul & Schmid, Eva & von Blücher, Felix & Breyer, Christian & Fernandez, Blanca & Jakob, Michael & Knopf, Brigitte & Lohrey, Steffen & Susca, Ti, 2014. "Catching two European birds with one renewable stone: Mitigating climate change and Eurozone crisis by an energy transition," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1015-1028.
    26. Pegels, Anna & Lütkenhorst, Wilfried, 2014. "Is Germany׳s energy transition a case of successful green industrial policy? Contrasting wind and solar PV," Energy Policy, Elsevier, vol. 74(C), pages 522-534.
    27. Rafindadi, Abdulkadir Abdulrashid, 2016. "Does the need for economic growth influence energy consumption and CO2 emissions in Nigeria? Evidence from the innovation accounting test," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 1209-1225.
    28. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    29. Yildiz, Özgür, 2014. "Financing renewable energy infrastructures via financial citizen participation – The case of Germany," Renewable Energy, Elsevier, vol. 68(C), pages 677-685.
    30. Apergis, Nicholas & Payne, James E., 2011. "The renewable energy consumption-growth nexus in Central America," Applied Energy, Elsevier, vol. 88(1), pages 343-347, January.
    31. Abdulkadir Abdulrashid Rafindadi & Zarinah Yusof, 2013. "Is Financial Development a Factor to the Leading Growth Profile of the South African Economy? Measuring and Uncovering the Hidden Secret," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 1(9), pages 99-112, September.
    32. Tugcu, Can Tansel & Ozturk, Ilhan & Aslan, Alper, 2012. "Renewable and non-renewable energy consumption and economic growth relationship revisited: Evidence from G7 countries," Energy Economics, Elsevier, vol. 34(6), pages 1942-1950.
    33. Sari, Ramazan & Ewing, Bradley T. & Soytas, Ugur, 2008. "The relationship between disaggregate energy consumption and industrial production in the United States: An ARDL approach," Energy Economics, Elsevier, vol. 30(5), pages 2302-2313, September.
    34. Abdulkadir Abdulrashid Rafindadi, 2015. "Could the Expanding Economic Growth and Trade Openness of the United Kingdom Pose a Threat to its Existing Energy Predicaments?," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 121-137.
    35. Gullberg, Anne Therese & Ohlhorst, Dörte & Schreurs, Miranda, 2014. "Towards a low carbon energy future – Renewable energy cooperation between Germany and Norway," Renewable Energy, Elsevier, vol. 68(C), pages 216-222.
    36. Rafindadi, Abdulkadir Abdulrashid & Ozturk, Ilhan, 2015. "Natural gas consumption and economic growth nexus: Is the 10th Malaysian plan attainable within the limits of its resource?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 1221-1232.
    37. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    38. Ackah, Ishmael & Kizys, Renatas, 2015. "Green growth in oil producing African countries: A panel data analysis of renewable energy demand," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1157-1166.
    39. Subrata Ghatak & Jalal Siddiki, 2001. "The use of the ARDL approach in estimating virtual exchange rates in India," Journal of Applied Statistics, Taylor & Francis Journals, vol. 28(5), pages 573-583.
    40. Abdulkadir Abdulrashid Rafindadi & Zarinah Yusof, 2013. "Is Financial Development A Factor to the Leading Growth Profile of the South African Economy in the Sub-Saharan Continents? Uncovering the Hidden Secret," Abstract of Economic, Finance and Management Outlook, Conscientia Beam, vol. 1, pages 1-19.
    41. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    42. Christian Bayer & Christoph Hanck, 2013. "Combining non-cointegration tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 34(1), pages 83-95, January.
    43. Li, Canbing & Shi, Haiqing & Cao, Yijia & Wang, Jianhui & Kuang, Yonghong & Tan, Yi & Wei, Jing, 2015. "Comprehensive review of renewable energy curtailment and avoidance: A specific example in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1067-1079.
    44. Cochran, Jaquelin & Mai, Trieu & Bazilian, Morgan, 2014. "Meta-analysis of high penetration renewable energy scenarios," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 246-253.
    45. Bhattacharya, Mita & Paramati, Sudharshan Reddy & Ozturk, Ilhan & Bhattacharya, Sankar, 2016. "The effect of renewable energy consumption on economic growth: Evidence from top 38 countries," Applied Energy, Elsevier, vol. 162(C), pages 733-741.
    46. Abdulkadir Rafindadi & Zarinah Yusof, 2015. "Do the dynamics of financial development spur economic growth in Nigeria’s contemporal growth struggle? A fact beyond the figures," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 365-384, January.
    47. Narayan, Paresh Kumar & Smyth, Russell, 2005. "Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests," Energy Policy, Elsevier, vol. 33(9), pages 1109-1116, June.
    48. Monstadt, Jochen & Scheiner, Stefan, 2014. "Allocating greenhouse gas emissions in the German federal system: Regional interests and federal climate governance," Energy Policy, Elsevier, vol. 74(C), pages 383-394.
    49. Stigka, Eleni K. & Paravantis, John A. & Mihalakakou, Giouli K., 2014. "Social acceptance of renewable energy sources: A review of contingent valuation applications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 100-106.
    50. Strunz, Sebastian, 2014. "The German energy transition as a regime shift," Ecological Economics, Elsevier, vol. 100(C), pages 150-158.
    51. Peter Boswijk, H., 1994. "Testing for an unstable root in conditional and structural error correction models," Journal of Econometrics, Elsevier, vol. 63(1), pages 37-60, July.
    52. Okyay Uçan & Ebru Arýcýoðlu & Fatih Yücel, 2014. "Energy Consumption and Economic Growth Nexus: Evidence from Developed Countries in Europe," International Journal of Energy Economics and Policy, Econjournals, vol. 4(3), pages 411-419.
    53. Kaplan, Yusuf Alper, 2015. "Overview of wind energy in the world and assessment of current wind energy policies in Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 562-568.
    54. Abdulkadir Abdulrashid Rafindadi & Zarinah Yusof, 2015. "Are Linear and Nonlinear Exchange Rate Exposures Aggravating Agents to Corporate Bankruptcy in Nigeria? New Evidence from the “U” Test Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 212-229.
    55. Shafiei, Sahar & Salim, Ruhul A., 2014. "Non-renewable and renewable energy consumption and CO2 emissions in OECD countries: A comparative analysis," Energy Policy, Elsevier, vol. 66(C), pages 547-556.
    56. Gorkemli Kazar & Arthur Kazar, 2014. "The Renewable Energy Production-Economic Development Nexus," International Journal of Energy Economics and Policy, Econjournals, vol. 4(2), pages 312-319.
    57. World Bank, 2013. "World Development Indicators 2013," World Bank Publications, The World Bank, number 13191.
    58. Tigas, K. & Giannakidis, G. & Mantzaris, J. & Lalas, D. & Sakellaridis, N. & Nakos, C. & Vougiouklakis, Y. & Theofilidi, M. & Pyrgioti, E. & Alexandridis, A.T., 2015. "Wide scale penetration of renewable electricity in the Greek energy system in view of the European decarbonization targets for 2050," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 158-169.
    59. Finn, Paddy & Fitzpatrick, Colin, 2014. "Demand side management of industrial electricity consumption: Promoting the use of renewable energy through real-time pricing," Applied Energy, Elsevier, vol. 113(C), pages 11-21.
    60. Spiecker, Stephan & Weber, Christoph, 2014. "The future of the European electricity system and the impact of fluctuating renewable energy – A scenario analysis," Energy Policy, Elsevier, vol. 65(C), pages 185-197.
    61. Zeb, Raheel & Salar, Laleena & Awan, Usama & Zaman, Khalid & Shahbaz, Muhammad, 2014. "Causal links between renewable energy, environmental degradation and economic growth in selected SAARC countries: Progress towards green economy," Renewable Energy, Elsevier, vol. 71(C), pages 123-132.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Afees A. Salisu & Umar B. Ndako & Idris Adediran, 2018. "Forecasting GDP of OPEC: The role of oil price," Working Papers 044, Centre for Econometric and Allied Research, University of Ibadan.
    2. repec:eee:energy:v:151:y:2018:i:c:p:622-632 is not listed on IDEAS
    3. repec:eee:rensus:v:81:y:2018:i:p1:p:1241-1246 is not listed on IDEAS
    4. repec:eee:rensus:v:90:y:2018:i:c:p:728-741 is not listed on IDEAS
    5. repec:eco:journ2:2017-04-30 is not listed on IDEAS
    6. Afees A. Salisu & Ahamuefula Ephraim Ogbonna, 2017. "Forecasting GDP with energy series: ADL-MIDAS vs. Linear Time Series Models," Working Papers 035, Centre for Econometric and Allied Research, University of Ibadan.
    7. repec:eee:rensus:v:81:y:2018:i:p1:p:1226-1240 is not listed on IDEAS
    8. repec:eee:energy:v:174:y:2019:i:c:p:69-84 is not listed on IDEAS
    9. repec:eco:journ2:2017-04-01 is not listed on IDEAS
    10. repec:eee:energy:v:170:y:2019:i:c:p:791-803 is not listed on IDEAS
    11. repec:eee:rensus:v:107:y:2019:i:c:p:1-19 is not listed on IDEAS
    12. Troster, Victor & Shahbaz, Muhammad & Uddin, Gazi Salah, 2018. "Renewable energy, oil prices, and economic activity: A Granger-causality in quantiles analysis," Energy Economics, Elsevier, vol. 70(C), pages 440-452.
    13. Hlalefang Khobai, 2018. "Renewable energy consumption and economic growth in Indonesia. Evidence from the ARDL bounds testing approach," Working Papers 1806, Department of Economics, Nelson Mandela University, revised Feb 2018.
    14. Nyoni, Bothwell & Phiri, Andrew, 2018. "Renewable energy-economic growth nexus in South Africa: Linear, nonlinear or non-existent?," MPRA Paper 89761, University Library of Munich, Germany.
    15. repec:eee:energy:v:175:y:2019:i:c:p:1259-1270 is not listed on IDEAS
    16. repec:eee:renene:v:133:y:2019:i:c:p:685-691 is not listed on IDEAS
    17. Mehmet Balcilar & Zeynel Abidin Ozdemir & Huseyin Ozdemir & Muhammad Shahbaz, 2018. "Carbon dioxide emissions, energy consumption and economic growth: The historical decomposition evidence from G-7 countries," Working Papers 15-41, Eastern Mediterranean University, Department of Economics.

    More about this item

    Keywords

    C61; D24; Q42; Economic Growth; Renewable energy; Capital; Bayer-Hanck; Green marketing;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:rensus:v:75:y:2017:i:c:p:1130-1141. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600126/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.