The role of foreign direct investment in the renewable electricity generation and economic growth nexus in Portugal: a cointegration and causality analysis
This study attempts to investigate a supply function for electricity in Portugal through cointegration and causality analysis over the sample period of 1970 to 2008 to test hypotheses related to the electricity-economic growth nexus in the literature. Evidence is found in favour of cointegration among electricity generation from renewable sources, real gross domestic product, inward foreign direct investment, carbon emissions from electricity production and population size in Portugal by using the bound testing approach to cointegration and error correction models developed within an autoregressive distributed lag (ARDL) framework. Evidence from Granger causality tests show that unidirectional causality is running from renewable electricity production to foreign direct investment in the short-run, and indicate the presence of bilateral causality among renewable electricity production, inward foreign direct investment, real income and population. The joint short- and long-run Granger causality tests provide further support for the feedback hypothesis. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign direct investment can induce conservation and efficient electricity use without obstructing economic growth. The promotion of foreign direct investment is crucial in boosting Portugal’s socio-economic development towards a more efficiency-orientated and less resource-depleting economy.
|Date of creation:||24 Sep 2012|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Payne, James E., 2010. "A survey of the electricity consumption-growth literature," Applied Energy, Elsevier, vol. 87(3), pages 723-731, March.
- Eskeland, Gunnar S.*Harrison, Ann E., 1997.
"Moving to greener pastures : multinationals and the pollution-haven hypothesis,"
Policy Research Working Paper Series
1744, The World Bank.
- Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
- Gunnar A. Eskeland & Ann E. Harrison, 2002. "Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis," NBER Working Papers 8888, National Bureau of Economic Research, Inc.
- Elliott, Graham, 1999.
"Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-783, August.
- Tom Doan, "undated". "ERSTEST: RATS procedure to perform Elliott-Rothenberg-Stock unit root tests," Statistical Software Components RTS00066, Boston College Department of Economics.
- Morimoto, Risako & Hope, Chris, 2004. "The impact of electricity supply on economic growth in Sri Lanka," Energy Economics, Elsevier, vol. 26(1), pages 77-85, January.
- de Mello, Luiz R, Jr, 1999.
"Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data,"
Oxford Economic Papers,
Oxford University Press, vol. 51(1), pages 133-151, January.
- L.R. de Mello Jr., 1996. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Studies in Economics 9615, School of Economics, University of Kent.
- Hansen, Bruce E, 1992.
"Tests for Parameter Instability in Regressions with I(1) Processes,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(3), pages 321-335, July.
- Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
- Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
- Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995.
"How Does Foreign Direct Investment Affect Economic Growth?,"
NBER Working Papers
5057, National Bureau of Economic Research, Inc.
- Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
- Engle, Robert F & Granger, Clive W J, 1987.
"Co-integration and Error Correction: Representation, Estimation, and Testing,"
Econometric Society, vol. 55(2), pages 251-276, March.
- 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.
- James E. Payne, 2010. "Survey of the international evidence on the causal relationship between energy consumption and growth," Journal of Economic Studies, Emerald Group Publishing, vol. 37(1), pages 53-95, January.
- Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992.
"Efficient Tests for an Autoregressive Unit Root,"
NBER Technical Working Papers
0130, National Bureau of Economic Research, Inc.
- Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
- Shahbaz, Muhammad & Tang, Chor Foon & Shahbaz Shabbir, Muhammad, 2011. "Electricity consumption and economic growth nexus in Portugal using cointegration and causality approaches," Energy Policy, Elsevier, vol. 39(6), pages 3529-3536, June.
- Mielnik, Otavio & Goldemberg, Jose, 2002. "Foreign direct investment and decoupling between energy and gross domestic product in developing countries," Energy Policy, Elsevier, vol. 30(2), pages 87-89, January.
- Chor Foon Tang, 2009. "Electricity consumption, income, foreign direct investment, and population in Malaysia," Journal of Economic Studies, Emerald Group Publishing, vol. 36(4), pages 371-382, September.
- Hübler, Michael & Keller, Andreas, 2010.
"Energy savings via FDI? Empirical evidence from developing countries,"
Environment and Development Economics,
Cambridge University Press, vol. 15(01), pages 59-80, February.
- Hübler, Michael & Keller, Andreas, 2008. "Energy savings via FDI? Empirical evidence from developing countries," Kiel Working Papers 1393, Kiel Institute for the World Economy (IfW).
- Narayan, Paresh Kumar & Prasad, Arti, 2008. "Electricity consumption-real GDP causality nexus: Evidence from a bootstrapped causality test for 30 OECD countries," Energy Policy, Elsevier, vol. 36(2), pages 910-918, February.
- Perron, Pierre & Rodriguez, Gabriel, 2003.
"GLS detrending, efficient unit root tests and structural change,"
Journal of Econometrics,
Elsevier, vol. 115(1), pages 1-27, July.
- PERRON, Pierre & RODRIGUEZ, Gabriel, 1998. "GLS Detrending, Efficient Unit Root Tests and Structural Change," Cahiers de recherche 9809, Universite de Montreal, Departement de sciences economiques.
- Tom Doan, "undated". "PERRONRODRIGUEZ: RATS procedure to perform Perron-Rodriguez unit root test allowing for break at unknown date," Statistical Software Components RTS00156, Boston College Department of Economics.
- Tom Doan, "undated". "GLSDETREND: RATS procedure to perform local to unity GLS detrending," Statistical Software Components RTS00077, Boston College Department of Economics.
- Ciarreta, A. & Zarraga, A., 2010. "Economic growth-electricity consumption causality in 12 European countries: A dynamic panel data approach," Energy Policy, Elsevier, vol. 38(7), pages 3790-3796, July.
- 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.
- Apergis, Nicholas & Payne, James E., 2012. "Renewable and non-renewable energy consumption-growth nexus: Evidence from a panel error correction model," Energy Economics, Elsevier, vol. 34(3), pages 733-738.
- Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-171, May.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:41533. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.