Renewable Energy Consumption and Economic Growth: Evidence from a Panel of OECD Countries

Abstract

This study examines the relationship between renewable energy consumption and economic growth for a panel of twenty OECD countries over the period 1985–2005 within a multivariate frame work. Given the relatively short span of the time series data, a panel cointegration and error correction model is employed to infer the causal relationship. The heterogeneous panel cointegration test reveals a long-run equilibrium relationship between real GDP, renewable energy consumption, real gross fixed capital formation, and the labor force with the respective coefficients positive and statistically significant. The Granger-causality results indicate bidirectional causality between renewable energy consumption and economic growth in both the short-and long-run.