Re-evaluating the asymmetric conventional energy and renewable energy consumption-economic growth nexus for Pakistan

Abstract

To understand the nexus between economic growth and energy sources, in this study, we have selected Pakistan and collected data over the period 1980-2016. The neoclassical production function of Pakistan is augmented with conventional and renewable energy, capital, and labor. Conversely, the conventional and renewable models are being constructed by using GDP as an independent variable. This paper applied linear and nonlinear ARDL models to see whether the influence of conventional and renewable energy consumption on GDP per capita of Pakistan is symmetric or asymmetric and vice versa. Furthermore, the asymmetric causal effects between the energy variables and economic growth are also discussed. From the findings of the study, we deduce the long-run asymmetric effects of renewable energy on the economic growth of Pakistan. Similarly, the asymmetric effects of GDP, in the long run, are confirmed in both energy models. The symmetric and asymmetric causality results have recommended growth and conservation hypothesis. The findings propose that renewable energy is a significant factor in boosting the economic growth of Pakistan and a decline in the use of renewable energy could actually stem the economic growth of Pakistan.

Keywords: Conventional energy consumption; Economic growth; NARDL; Pakistan; Renewable energy consumption.