Energy imports as inhibitor of economic growth: The role of impact of renewable and non-renewable energy consumption

Abstract

This study investigates the role of energy imports in domestic production function in the case of 15 energy-importing countries for the period of 1995-2015. Apart from energy imports, renewable energy consumption, non-renewable energy consumption, capital, trade openness, and urbanization are included in the growth model. In doing so, long-run elasticity coefficients are estimated with the Dynamic Seemingly Unrelated Regressions (DSUR) model after determining the cointegration relationship between the variables. In addition, for robustness checks, Panel Correlated Standard Errors (PCSE) and Feasible Generalized Least Squares (FGLS) estimators are applied. Our results show that renewable energy consumption, non-renewable energy consumption, trade openness, and capital have a positive effect on economic growth. Energy imports negatively affect economic growth. The Dumitrescu-Hurlin causality analysis reveals a bidirectional causality relationship between renewable energy consumption, capital, trade openness, urbanization, and economic growth. A unidirectional causality relationship exists from economic growth to non-renewable energy consumption and energy imports. This analysis can be interpreted as having a negative impact on economic growth by putting pressure on the current account deficit due to energy imports. Therefore, investments in the renewable energy sector will play an important role in economic growth.