The impact of fossil and non-fossil energy consumption on economic growth : -Evidence from a pooled mean group analysis

Sammanfattning: This paper investigates the causal relationship between economic growth and fossil and nonfossil energy consumption while controlling for human and physical capital in a panel of 74 countries over 1990 to 2017. The global sample was divided into four categories according to the World Bank income classifications: low-income, lower-middle income, upper-middle income, and high-income. The purpose of the income level subsamples was to further analyze the role of the country’s income level in the nexus between energy consumption and economic growth. This paper uses panel unit root and cross-sectional independence testing and employs the Pooled Mean Group estimator. The main results in this paper reveal (1) bidirectional causality between fossil energy consumption and economic growth for the low income and lower-middle income countries; (2) unidirectional causality from economic growth to fossil energy consumption for the high income and upper-middle income countries. In terms of nonfossil energy consumption, the results are more mixed; there is (3) unidirectional causality from economic growth to non-fossil energy consumption for the low-income and upper-middle income countries; (4) bidirectional causality between non-fossil energy consumption and economic growth for the lower-middle income countries; and (5) unidirectional causality from non-fossil energy consumption to economic growth for the high-income countries. These results have several policy implications that are discussed.