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Renewable Energy—Economic Growth Nexus: Addressing Potential Issues of Endogeneity and the Precision of the Long-Run Relationship

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Econometrics of Green Energy Handbook

Abstract

In the face of the global energy challenges and the associated climate issues, the transition to renewable energy sources continues to gain grounds. Proponents of renewable energy transition argue that renewable energy supply promotes economic growth. However, the concerns of variability in renewable energy supply cast doubt on the growth-driven argument. Thus, whether renewable energy supply will promote economic growth or not is an empirical question. This chapter examined the nexus between renewable energy supply and economic growth. As a contribution, this paper addressed potential problems of endogeneity and the precision of the long-run estimates. The result showed that renewable energy supply causes economic growth in the short run while economic growth causes renewable energy supply in the long run. Cointegrating estimates revealed positive effects of renewable energy supply on economic growth in the short run but negative effects on economic growth in the long run. The interdependency between renewable energy supply and economic growth implies that investment in renewable energy supply could stimulate economic growth but only in the short run.

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Notes

  1. 1.

    Note: This equation is estimated using the FMOLS and CCR.

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Author information

Authors and Affiliations

  1. Ghana GRID Company Limited (GRIDCo), Tema, Ghana

    Adwoba Manyekyi Bentil

  2. Department of Development Policy, School of Public Service and Governance, Ghana Institute of Management and Public Administration (GIMPA), Accra, Ghana

    Philip Kofi Adom

Authors
  1. Adwoba Manyekyi Bentil
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Correspondence to Philip Kofi Adom .

Editor information

Editors and Affiliations

  1. School of Management and Economics, Beijing Institute of Technology, Beijing, China

    Muhammad Shahbaz

  2. Department of Political Economy and Public Finance, Universidad de Castilla-La Mancha, Cuenca, Spain

    Daniel Balsalobre-Lorente

Appendix

Appendix

See Appendix Figs. 13.2, 13.3 and 13.4.

Fig. 13.2
figure 2

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Inverse roots of AR characteristic polynomial.

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Fig. 13.3
figure 3

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Results of cumulative sum (CUSUM).

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Fig. 13.4
figure 4

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Results of cumulative sum of squared (CUSUMSQ).

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Bentil, A.M., Adom, P.K. (2020). Renewable Energy—Economic Growth Nexus: Addressing Potential Issues of Endogeneity and the Precision of the Long-Run Relationship. In: Shahbaz, M., Balsalobre-Lorente, D. (eds) Econometrics of Green Energy Handbook. Springer, Cham. https://doi.org/10.1007/978-3-030-46847-7_13

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