The Effect of Renewable Energy Consumption on Economic Stability: Panel Data Analysis on Selected Countries

Authors

DOI:

https://doi.org/10.5195/emaj.2020.201

Keywords:

Energy, Renewable Energy, Non-Renewable Energy, Economic Stability, Political Stability

Abstract

This study aims to investigate the effect of renewable energy consumption on economic stability. In this regard, covering the period of 1990-2016, data of 35 countries, 19 of which are developed and 16 of which are developing, were used. The cointegration analysis results reveal that, there is a long-term relationship between the two variables in developed and developing countries. According to panel coefficient estimators, the effect of renewable energy consumption on economic stability is positive and statistically meaningful in Germany, Denmark, Italy, Switzerland, and Sweden, which are developed countries, and also in Egypt, Turkey, Taiwan, Pakistan, and Indonesia, which are developing countries. However, the effect is negative and significant in contrast to expectations in England and Belgium, which are developed countries, and in India and the Philippines, which are developing countries.

Author Biographies

Tunahan Hacıimamoğlu, Recep Tayyip Erdoğan University

Faculty of Economics and Administrative Sciences / 
Economic Development and International Economics

Ali Rıza Sandalcılar, Recep Tayyip Erdoğan University

Faculty of Economics and Administrative Sciences / 
Economic Development and International Economics

References

Aguiar-Conraria, L., & Wen, Y. (2008). A note on oil dependence and economic instability. Macroeconomic Dynamics, 12(5), 717-723.

Akarca, A. T., & Long, T. V. (1980). On the relationship between energy and GNP: a reexamination. The Journal of Energy and Development, 326-331.

Allen, E. L., Cooper, C. L., Edmonds, F. C., Edmonds, J. A., Reister, D. B., Weinberg, A. M., ... & Zelby, L. W. (1976). US energy and economic growth, 1975--2010 (No. ORAU/IEA-76-7). Institute for Energy Analysis, Oak Ridge, Tenn.(USA).

Bhattacharya, M., Paramati, S. R., Ozturk, I., & Bhattacharya, S. (2016). The effect of renewable energy consumption on economic growth: Evidence from top 38 countries. Applied Energy, 162, 733-741.

Breusch, T. S., & Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The review of economic studies, 47(1), 239-253.

Chaudhry, M. O., Faridi, M. Z., & Riaz, S. (2015). Energy Crisis and Macroeconomic Stability in Pakistan. Pakistan Journal of Social Sciences (PJSS), 35(1).

Eberhardt, M., & Bond, S. (2009). Cross-section dependence in nonstationary panel models: a novel estimator.

Eberhardt, M., & Teal, F. (2010). Aggregation versus Heterogeneity in Cross-Country Growth Empirics.

Eden, S. H., & Hwang, B. K. (1984). The relationship between energy and GNP: further results. Energy economics, 6(3), 186-190.

Emirmahmutoglu, F., & Kose, N. (2011). Testing for Granger causality in heterogeneous mixed panels. Economic Modelling, 28(3), 870-876.

Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of political economy, 91(2), 228-248.

Hanff, E., Dabat, M. H., & Blin, J. (2011). Are biofuels an efficient technology for generating sustainable development in oil-dependent African nations? A macroeconomic assessment of the opportunities and impacts in Burkina Faso. Renewable and sustainable energy reviews, 15(5), 2199-2209.

Hitch, C. J. (1978). Energy conservation and economic growth.

Hudson, E. A., & Jorgenson, D. W. (1974). US energy policy and economic growth, 1975-2000. The Bell Journal of Economics and Management Science, 461-514.

Kaldor, N. (1976). Speculation and economic stability. In The Economics of Futures Trading (pp. 111-123). Palgrave Macmillan, London.

Kraft, J., & Kraft, A. (1978). On the relationship between energy and GNP. The Journal of Energy and Development, 401-403.

Leblond, P. (2006). The political Stability and Growth Pact is dead: long live the economic Stability and Growth Pact. JCMS: Journal of Common Market Studies, 44(5), 969-990.

Maji, I. K., Sulaiman, C., & Abdul-Rahim, A. S. (2019). Renewable energy consumption and economic growth nexus: A fresh evidence from West Africa. Energy Reports, 5, 384-392.

Maradin, D., Cerović, L., & Mjeda, T. (2017). Economic Effects of Renewable Energy Technologies. Naše gospodarstvo/Our economy, 63(2), 49-59.

McCoskey, S., & Kao, C. (1998). A residual-based test of the null of cointegration in panel data. Econometric reviews, 17(1), 57-84.

Menyah, K., Nazlioglu, S., & Wolde-Rufael, Y. (2014). Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling, 37, 386-394.

Nkomo, J. C. (2005). Energy and economic development: challenges for South Africa.

Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels.

Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of applied econometrics, 22(2), 265-312.

Pesaran, M. H., & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of econometrics, 142(1), 50-93.

PRS Group. (2018). International Country Risk Guide (ICRG), Methodology. Retrieved in May, https://www.prsgroup.com/wp-content/uploads/2018/01/icrgmethodology.pdf.

Swamy, P. A. (1970). Efficient inference in a random coefficient regression model. Econometrica: Journal of the Econometric Society, 311-323.

Toda, H. Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of econometrics, 66(1-2), 225-250.

Van de Ven, D. J., & Fouquet, R. (2017). Historical energy price shocks and their changing effects on the economy. Energy Economics, 62, 204-216.

WEF (2019). Fostering Effective Energy Transition 2019 edition.

WESP (2019). World Economic Situation and Prospect Report.

Westerlund, J. (2008). Panel cointegration tests of the Fisher effect. Journal of Applied Econometrics, 23(2), 193-233.

Westerlund, J., & Edgerton, D. L. (2007). A panel bootstrap cointegration test. Economics letters, 97(3), 185-190.

Downloads

Published

2020-09-23

Issue

Section

Articles