The effect of renewable energy consumption on economic growth in KSA: A bootstrap causality test

Abstract

The majority of studies analyzed show a positive and statistically significant impact of renewable energy consumption on economic growth. Nevertheless, some studies suggest a limited effect, while others find no statistically significant effect. Faced with this problem, we conducted a study aimed at analyzing the impact of renewable energy consumption on economic growth in the Kingdom of Saudi Arabia for the period 1990–2020. To determine the integration properties of the variables, we utilized the sharp and smooth structural breaks unit root test developed by Shahbaz, Omay and Roubaud (SOR). We also used the bootstrap approach of testing ARDL limits to examine the cointegration between variables. Using the VECM model, we studied the causal relationship between economic growth and its determinants. The results show, in the short and long run, the existence of a bidirectional causality between renewable energy consumption and economic growth (Feedback Hypothesis). Thus, there is a bidirectional relationship between GDP and capital and also between GDP and labor, in the long run. Therefore, an important policy implication resulting from this analysis is that renewable energy can be considered as an important factor for sustainable economic development in Saudi Arabia. The findings for Saudi Arabia may also be relevant for oil exporting countries to achieve efficiency and promote the renewable energy sector beyond oil.

Does globalization matter in the relationship between renewable energy consumption and economic growth, evidence from Asian emerging economies

“…Evidence for the direction of causality between renewable energy consumption and economic growth is also mixed for individual countries. [ 62 ] use a VECM model to reveal short- and long-term causal relationships between renewable energy consumption and economic growth in Saudi Arabia over the period 1990–2020. The results support the feedback hypothesis, as there is a short- and long-term bidirectional causal relationship between renewable energy consumption and economic growth.…”

Which clean energy contributes better for growth? – dynamic panel analysis of heterogeneous impacts of individual renewable sources on economic growth

“…Destek 13 showed a negative relationship between renewable energy and GDP growth in newly industrialized countries such as Mexico and South Africa, based on the autoregressive distributed lag (ARDL) model, and suggested that investment in the renewable energy sector can be more burdensome for developing countries and harm economic growth before reaching an appropriate deployment level. Berradia et al 14 show a bidirectional causality between economic growth and renewable energy consumption in the short and long run. Moreover, Emir and Bekun 15 discuss the same topic in Romania and says that there is uni-directional causality between energy consumption and economic growth.…”