Investigating the Energy–Economic Growth–Governance Nexus: Evidence from Central and Eastern European Countries

Abstract

Achieving the goals of sustainable development and poverty reduction implies an important condition for access to electricity for the entire population. In the economic literature, the relationship between electricity consumption and economic growth has different perspectives. The lack of good governance within an economy, besides the deficiencies of energy resources, is a key issue in worsening energy issues for developing countries. These countries have failed to alleviate the energy crises that have hindered development prospects, amid flourishing corruption and inefficient governments. Our research, using a panel methodology, analyzes the long-term relationship between energy consumption, economic growth and good governance for 14 Central and Eastern European countries, over the period 1995–2017. The study demonstrates empirically that there is a causal relationship between electricity consumption and economic growth, underlining the fact that deficiencies in the energy system lead to slowing economic growth. The study also shows that good governance influences electricity and Gross Domestic Product (GDP) consumption, and the governments from Central and Eastern European countries have to restore good governance in the economy, creating an environment conducive to investment in the energy sector, which would increase competition and reduce inefficiencies in the production, transmission, and distribution of energy.

A Review of the Nexus Between Energy Consumption and Economic Growth in the Brics Countries

“…The short run results observed that economic growth Granger-causes carbon dioxide emission while energy consumption Granger-cause carbon dioxide emission and economic growth. Bercu et al (2019) conducted one of the recent studies to examine the relationship between energy, economic growth and governance. The study established an existence of causal relationship between electricity consumption and economic growth.…”

Factors Influencing Energy Consumption in the Context of Sustainable Development

“…Yet, the Industrial Revolution also had side effects, on economic, social and environmental levels. Those countries which could afford to invest in developing the industrial sector are still economic world leaders, a fact that roots social disparities [4] and those which are currently developing are expected to increase their energy consumption [3,5] since there is an obvious relationship between energy consumption and economic growth [5]. This also caused severe environmental damage, understood mostly by climate changes [6].…”

Exploring the driving factors of economic growth in the world's largest economies

“…The feedback hypothesis considers the bidirectional causal link between economic growth and energy consumption; and the studies of Mutascu (2016) for G7 countries, Saidi et al (2017) for a panel of 53 countries, Bercu et al (2019) for central and eastern European countries support this hypothesis. This hypothesis was also confirmed for some individual country studies like Shahbaz et al (2013) for Indonesia, Islam et al (2013) for Malaysia, and Farhani and Rahman (2019) for France.…”

“…The feedback hypothesis considers the bidirectional causal link between economic growth and energy consumption; and the studies of Mutascu (2016) for G7 countries, Saidi et al. (2017) for a panel of 53 countries, Bercu et al. (2019) for central and eastern European countries support this hypothesis.…”

“…The subsequent research and empirical evidence identified the direction of causal association between economic growth and energy consumption under four erudite strands for formulating suitable energy policies. These strands are the growth hypothesis, the conservation hypothesis, the feedback hypothesis, and the neutrality hypothesis ( Shahbaz et al., 2013 , 2018 ; Saidi et al., 2017 ; Farhani and Rahman, 2019 ; Bercu et al., 2019 ; Rahman and Velayutham, 2020 ).…”