Relationship between Renewable Energy Consumption and Economic Growth in Five South Asian Countries: An Empirical Analysis

Farhan Khan, Sakib B. Amin, and Saanjaana Rahman

Increased amount of fossil energy consumption in developing or emerging countries has created major concerns about global warming where renewable energy could be a good option which can assist to continue stable economic growth as well as can prevent environmental degradation. To the best of our knowledge, no studies have been conducted to investigate the relationship between renewable energy consumption and economic growth in five South Asian neighboring countries and so the aim of this paper is to investigate the relationship between the two concerned variables with the help of panel data ranging from 1981-2015. Johansen-Fisher cointegration test results show that in the long run variables are cointegrated and Dumitrescu-Hurlin panel causality test results show a bidirectional causality between renewable energy consumption and economic growth in the long runsupporting feedback hypothesis. According to Vector Error Correction Model, no causality has been found in short run and long run estimation results show coefficient of renewable energy consumption is inelastic but positive. As all of the selected countries are walking on the path of development in terms of socially and economically, policies should be taken in favor of promoting renewable energy consumption as well as development of renewable energy sector.