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The causal relationship between renewable energy consumption and economic growth: Evidence from the G7 countries

Author

Listed:
  • Tsangyao Chang

    (Department of Finance, Feng Chia University, Taichung, Taiwan)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

  • Roula Inglesi-Lotz

    (Department of Economics, University of Pretoria)

  • Beatrice D. Simo-Kengne

    (Department of Economics, University of Pretoria)

  • Devon Smithers

    (Department of Economics, University of Pretoria)

  • Amy B. Trembling

    (Department of Economics, University of Pretoria)

Abstract

This paper examines the causal relationship between renewable energy consumption and economic growth for the G7 countries using annual data from 1990 to 2011. We implement a bootstrap panel causality procedure which allows us to circumvent the data limitation while accounting for the heterogeneity and cross sectional dependency issues that arise in panel data analysis. Empirical results provide evidence of a bidirectional causality between economic growth and renewable energy; suggesting that renewable energy expansion might help improve the economic performance of the G7 countries. Conversely, individual country results support a unidirectional causality running from economic growth to renewable energy for France and the UK; the reverse causality for Japan and no causality in any direction between the two variables for the remaining countries.

Suggested Citation

  • Tsangyao Chang & Rangan Gupta & Roula Inglesi-Lotz & Beatrice D. Simo-Kengne & Devon Smithers & Amy B. Trembling, 2013. "The causal relationship between renewable energy consumption and economic growth: Evidence from the G7 countries," Working Papers 201372, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201372
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    More about this item

    Keywords

    Renewable energy; Economic Growth; Dependency and Heterogeneity; Panel Causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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