skip to main content

Exploring the link between green energy, CO2 emissions, exchange rate and economic growth: Perspective from emerging South Asian countries

1Department of Banking & Insurance, Faculty of Business Administration, University of Chittagong, Chattogram 4331, Bangladesh

2Department of Accounting, Faculty of Business Administration, University of Chittagong, Chattogram 4331, Bangladesh

Received: 20 Mar 2023; Revised: 12 Jul 2023; Accepted: 15 Aug 2023; Available online: 28 Aug 2023; Published: 1 Sep 2023.
Editor(s): Grigorios Kyriakopoulos
Open Access Copyright (c) 2023 The Author(s). Published by Centre of Biomass and Renewable Energy (CBIORE)
Creative Commons License This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Citation Format:

This paper investigates the nexus between renewable energy use, CO2 emissions, exchange rate, and economic development within emerging South Asian nations, namely Bangladesh, India, Pakistan, and Sri Lanka, employing the Autoregressive Distributed Lag (ARDL) framework. It examines annual data spanning from 1990 to 2019, examining key indicators of renewable energy consumption, CO2 emissions, exchange rate, and economic development. The ARDL bounds test results demonstrate the existence of co-integration among the variables in the long run. The empirical result finds that the renewable energy consumption, CO2 emissions, and exchange rate have a significant impact on economic growth in Bangladesh, Pakistan, and Sri Lanka in the long run. In India no significant relationship found in the long run. In short run assessment, Bangladesh, India, and Sri Lanka also found same relationship with economic growth and renewable energy consumption, CO2 emissions, and exchange rate. Interestingly, In Pakistan no significant relationship has found in short run estimation analysis. Furthermore, study tried to determine the causality direction by using the Toda Yamamoto granger causality approach, which reveals bidirectional causation between exchange rate and CO2 emission in India. In Pakistan, study also found  bi-directional causality among the variables renewable energy consumption, CO2 emissions, and economic growth. Finally, this paper emphasizes developing the policy as well as making a concrete decision regarding the renewable energy consumption, CO2 emissions, exchange rate, and economic development for ensuring sustainable economic growth in South Asian region. Future research could extend this work by including different dimensional data, additional countries, or using alternative or supplementary modeling techniques.

Fulltext View|Download
Keywords: Renewable Energy, Economic Growth, ARDL, Co-integration, Causality, South Asia.

Article Metrics:

  1. Abedin, M. T., Sen, K. K., Rahman, M. R., & Akter, S. (2020). Socioeconomic Factors of Stock Market Development: Role of Tertiary Education. Journal of European Economy, 19(Vol 19, No 2 (2020)), 224–245.
  2. Apergis, N., & Payne, J. E. (2009). Energy consumption and economic growth in Central America: Evidence from a panel cointegration and error correction model. Energy Economics, 31(2), 211–216.
  3. Asemota, F. F., & Olokoyo, F. O. (2022). Renewable Energy Financing and Sustainable Industrial Development in Nigeria. International Journal of Energy Economics and Policy, 12(4), 563–567.
  4. Aslantürk, O., & Kıprızlı, G. (2020). The role of renewable energy in ensuring energy security of supply and reducing energy-related import. International Journal of Energy Economics and Policy, 10(2), 354–359.
  5. Bilan, Y., Streimikiene, D., Vasylieva, T., Lyulyov, O., Pimonenko, T., & Pavlyk, A. (2019). Linking between renewable energy, CO2 emissions, and economic growth: Challenges for candidates and potential candidates for the EU membership. Sustainability (Switzerland), 11(6), 1–16.
  6. Bouyghrissi, S., Berjaoui, A., & Khanniba, M. (2021). The nexus between renewable energy consumption and economic growth in Morocco. Environmental Science and Pollution Research, 28(5), 5693–5703.
  7. Bowden, N., & Payne, J. E. (2010). Sectoral analysis of the causal relationship between renewable and non-renewable energy consumption and real output in the US. Energy Sources, Part B: Economics, Planning and Policy, 5(4), 400–408.
  8. Brown, R. L., Durbin, J., & Evans, J. M. (2011). Techniques for Testing the Consitancu of the Regression Relationships over Time. Society, 37(2), 149–192
  9. Bulut, U., & Muratoglu, G. (2018). Renewable energy in Turkey: Great potential, low but increasing utilization, and an empirical analysis on renewable energy-growth nexus. Energy Policy, 123(May), 240–250.
  10. Chen, J., Su, F., Jain, V., Salman, A., Tabash, M. I., Haddad, A. M., Zabalawi, E., Abdalla, A. A., & Shabbir, M. S. (2022). Does Renewable Energy Matter to Achieve Sustainable Development Goals? The Impact of Renewable Energy Strategies on Sustainable Economic Growth. Frontiers in Energy Research, 10(March), 1–7.
  11. Chen, Y., Zhao, J., Lai, Z., Wang, Z., & Xia, H. (2019). Exploring the effects of economic growth, and renewable and non-renewable energy consumption on China’s CO2 emissions: Evidence from a regional panel analysis. Renewable Energy, 140(October), 341–353.
  12. Cherni, A., & Essaber Jouini, S. (2017). An ARDL approach to the CO2 emissions, renewable energy and economic growth nexus: Tunisian evidence. International Journal of Hydrogen Energy, 42(48), 29056–29066.
  13. Da Silva, P. P., Cerqueira, P. A., & Ogbe, W. (2018). Determinants of renewable energy growth in Sub-Saharan Africa: Evidence from panel ARDL. Energy, 156, 45–54.
  14. Daoud, J. I. (2018). Multicollinearity and Regression Analysis. Journal of Physics: Conference Series, 949(1).
  15. Darvishi, H., & Varedi, S. (2018). Assessment of the contemporaneous impacts of gross domestic product and renewable energy consumption, applying the dynamic panel data: Evidence from developed countries. International Journal of Energy Economics and Policy, 8(1), 159–166
  16. Deka, A., Cavusoglu, B., & Dube, S. (2022). Does renewable energy use enhance exchange rate appreciation and stable rate of inflation? Environmental Science and Pollution Research, 29(10), 14185–14194.
  17. Deka, A., & Dube, S. (2021). Analyzing the causal relationship between exchange rate, renewable energy and inflation of Mexico (1990–2019) with ARDL bounds test approach. Renewable Energy Focus, 37(June), 78–83.
  18. Dolado, J. J., & Lütkepohl, H. (1996). Making wald tests work for cointegrated VAR systems Making Wald Tests Work for Cointegrated VAR Systems. Econometric Reviews, 15(4), 369–386.
  19. Emir, F., & Bekun, F. V. (2019). Energy intensity, carbon emissions, renewable energy, and economic growth nexus: New insights from Romania. Energy and Environment, 30(3), 427–443.
  20. Engle, R. F., & Granger, C. W. J. (1987). Co-integration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251–276.
  21. Farhani, S. (2013). Renewable Energy Consumption, Economic Growth and. Energy. Economics Letters, 1(2), 24–41
  22. Gregory, A. W., & Hansen, B. E. (1996). Residual-based tests for cointegration in models with regime. Journal of Economometrics, 70(1), 99–126.
  23. Hassine, M. Ben, & Harrathi, N. (2017). The causal links between economic growth, renewable energy, financial development and foreign trade in gulf cooperation council countries. International Journal of Energy Economics and Policy, 7(2), 76–85
  24. Hongxing, Y., Abban, O. J., Boadi, A. D., & Ankomah-Asare, E. T. (2021). Exploring the relationship between economic growth, energy consumption, urbanization, trade, and CO2 emissions: a PMG-ARDL panel data analysis on regional classification along 81 BRI economies. Environmental Science and Pollution Research, 28(46), 66366–66388.
  25. Issa Shahateet, M. (2014). Modeling economic growth and energy consumption in Arab countries: Cointegration and causality analysis. International Journal of Energy Economics and Policy, 4(3), 349–359
  26. Jbir, R., & Zouari-Ghorbel, S. (2009). Recent oil price shock and Tunisian economy. Energy Policy, 37(3), 1041–1051.
  27. Johansen, S. (1992). Determination of Cointegration Rank in the Presence of A Linear Trend. Oxford Bulletin Of Economics And Statistics, 54(3), 383–397.
  28. Kahia, M., Omri, A., & Jarraya, B. (2021). Green Energy, economic growth and environmental quality nexus in Saudi Arabia. Sustainability (Switzerland), 13(3), 1–13.
  29. Koçak, E., & Şarkgüneşi, A. (2017). The renewable energy and economic growth nexus in black sea and Balkan Countries. Energy Policy, 100(June 2016), 51–57.
  30. Le, H. P., & Sarkodie, S. A. (2020). Dynamic linkage between renewable and conventional energy use, environmental quality and economic growth: Evidence from Emerging Market and Developing Economies. Energy Reports, 6, 965–973.
  31. Le, T. H. (2022). Connectedness between nonrenewable and renewable energy consumption, economic growth and CO2 emission in Vietnam: New evidence from a wavelet analysis. Renewable Energy, 195, 442–454.
  32. Li, R., & Leung, G. C. K. (2021). The relationship between energy prices, economic growth and renewable energy consumption: Evidence from Europe. Energy Reports, 7, 1712–1719.
  33. Liu, J.-L., Ma, C.-Q., Ren, Y.-S., & Zhao, X.-W. (2020). Do Real Output and Renewable Energy Consumption BRICS Countries. Energies, 1–18
  34. Magazzino, C. (2017). Renewable energy consumption-economic growth nexus in Italy. International Journal of Energy Economics and Policy, 7(6), 119–127
  35. Mahmood, N., Wang, Z., & Hassan, S. T. (2019). Renewable energy, economic growth, human capital, and CO2 emission: an empirical analysis. Environmental Science and Pollution Research, 26(20), 20619–20630.
  36. Omri, A. (2014). An international literature survey on energy-economic growth nexus: Evidence from country-specific studies. Renewable and Sustainable Energy Reviews, 38, 951–959.
  37. Oteng-Abayie, E. F., & Frimpong, M. J. (2006). Bounds Testing Approach to Cointegration: An Examination of Foreign Direct Investment Trade and Growth Relationships. American Journal of Applied Sciences, 3(11), 2079–2085
  38. Oyedepo, S. O. (2012). Energy and sustainable development in Nigeria: the way forward Sustainable energy Renewable energy Energy efficiency Energy conservation Review Background. Energy, Sustainability and Society, 2, 1–17.­0567­2­15
  39. Pesaran, M. H., & Shin, Y. (1997). An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. Symposium at the Centennial of Ragnar Frisch, The Norwegian Academy of Science and Letters, 1–24.
  40. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal Of Applied Econometrics, 16(3), 289–326.
  41. Rahman, M. R. (2023). The Effect of Trade Development on Fossil Fuel Consumption in South Asian Countries. Energy RESEARCH LETTERS, 4(Early View).
  42. Rahman, M. R., Rahman, M. M., & Akter, R. (2023). Renewable energy development, unemployment and GDP growth: South Asian evidence. Arab Gulf Journal of Scientific Research.
  43. Sadorsky, P. (2009). Renewable energy consumption and income in emerging economies. Energy Policy, 37(10), 4021–4028.
  44. Salam, R. A., Amber, K. P., Ratyal, N. I., Alam, M., Akram, N., Muñoz, C. Q. G., & Márquez, F. P. G. (2020). An overview on energy and development of energy integration in major south asian countries: The building sector. Energies, 13(21).
  45. Salehin, M., & Kiss, J. T. (2022). Testing the Causal Relationship between Economic Growth and Renewable Energy Consumption: Evidence from a Panel of EAGLE Countries. International Journal of Energy Economics and Policy, 12(1), 281–288.
  46. Saltelli, A. (2002). Sensitivity analysis for importance assessment. Risk Analysis, 22(3), 579–590.
  47. Soava, G., Mehedintu, A., Sterpu, M., & Raduteanu, M. (2018). Impact of renewable energy consumption on economic growth: Evidence from European Union countries. Technological and Economic Development of Economy, 24(3), 914–932.
  48. Sulub, Y. A., Hamid, Z., & Nazri, M. N. M. (2020). Renewable energy supply and economic growth in malaysia: An application of bounds testing and causality analysis. International Journal of Energy Economics and Policy, 10(3), 255–264.
  49. Toda, H. Y., & Yamamotob, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1–2), 225–250.
  50. Viktorovna, F. I., Yurievich, N. V., Viktorovna, P. I., & Mikhailovna, O. L. (2021). Impact of renewable energy sources consumption on economic growth in europe and asia-pacific region. International Journal of Energy Economics and Policy, 11(6), 270–278.
  51. Watts, N., Adger, W. N., & Agnolucci, P. (2015). Health and climate change: Policy responses to protect public health. Environnement, Risques et Sante, 14(6), 466–468.
  52. Wang, Q., Dong, Z., Li, R., & Wang, L. (2022). Renewable energy and economic growth: New insight from country risks. Energy, 238, 122018.
  53. Wu, J., Feng, Z., & Tang, K. (2021). The dynamics and drivers of environmental performance in Chinese cities: a decomposition analysis. Environmental Science and Pollution Research, 28(24), 30626–30641.
  54. Zaman, S., Wang, Z. & Zaman, Q.u. (2021) Exploring the relationship between remittances received, education expenditures, energy use, income, poverty, and economic growth: fresh empirical evidence in the context of selected remittances receiving countries. Environ Sci Pollut Res 28, 17865–17877.

Last update:

  1. Analysis of a standing wave thermoacoustic engine with multiple unit stages

    Prastowo Murti, Ikhsan Setiawan, Jihan Zeinyuta Rosafira, Adhika Widyaparaga, Wijayanti Dwi Astuti, Tetsushi Biwa. International Journal of Renewable Energy Development, 13 (4), 2024. doi: 10.61435/ijred.2024.60098

Last update: 2024-06-20 09:49:56

No citation recorded.