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Another outlook into energy‐growth nexus in Mexico for sustainable development: Accounting for the combined impact of urbanization and trade openness

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  • Tomiwa Sunday Adebayo
  • Festus Victor Bekun
  • Ilhan Ozturk
  • Murat Ismet Haseki

Abstract

This study corroborates the importance of United Nations Sustainable Development Goal 7 (SDG‐7), intended to ensure access to affordable, reliable, sustainable energy for all, and SDG‐8, designed to promote decent work and sustainable economic growth. This article is motivated by the highlighted SDGs and empirically explores the long‐run and causality relationship between energy consumption, urbanization, trade openness, and economic growth for annual frequency data from 1965 to 2021 for the case of Mexico. To this end, we leverage the use of fully modified ordinary least squares, dynamic ordinary least squares, and canonical regression estimation methods, while for the direction of causality, the gradual shift and wavelet coherence methods are used. According to the Autoregressive distributed lag (ARDL), the bounds test traces a long‐run relationship between the outlined variables over the sampled period. Empirical evidence validates the energy‐induced growth hypothesis. This result resonates with the causality analysis, where energy consumption drives economic growth one way in Mexico. This suggests that Mexico cannot embark on energy‐conservative policies, as such actions will hurt economic progress. In addition, unidirectional causality is seen between urbanization, trade openness, and economic growth. These findings have far‐reaching implications for economic growth and macroeconomic indicators in Mexico. More insights are highlighted in the concluding section.

Suggested Citation

  • Tomiwa Sunday Adebayo & Festus Victor Bekun & Ilhan Ozturk & Murat Ismet Haseki, 2023. "Another outlook into energy‐growth nexus in Mexico for sustainable development: Accounting for the combined impact of urbanization and trade openness," Natural Resources Forum, Blackwell Publishing, vol. 47(2), pages 334-352, May.
    • Handle: RePEc:wly:natres:v:47:y:2023:i:2:p:334-352
    DOI: 10.1111/1477-8947.12283
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