Energy Consumption And Economic Growth Nexus In BRICS Countries: A Panel Analysis Study

This study has examined the energy-economic growth nexus by incorporating GDP per capita as a proxy for economic growth and as a dependent variable.While,agricultural growth,energy consumption(fossil fuels and electricity),the share of industry on GDP,and urban population as independent variables.An annual data of BRICS countries covering the period from 1980 to 2016 and from 1990 to 2015.This study pursues its objectives by applying two well-known models,namely the Cobb-Douglas production function and Stochastic Impacts by Regression on Population,Affluence,and Technology(STIRPAT).Before estimating the linkage between energy consumption and economic growth,this study employs panel econometric methods such as panel unit root tests,panel co-integration tests,and Granger causality tests.Accordingly,the methods such as Dynamic Ordinary Least Square(DOLS)and Fully Modified Ordinary Least Square(FMOLS)were adopted.To determine the direction of causation between the variables that have important policy implications,the Pairwise Granger causality technique was used.The empirical results of this study are as follows: i)All variables were found to be integrated of order one I(1)after their first difference.ii)The panel co-integration results show that the null hypothesis of no co-integration was rejected at 1% and 5% level of significance both for economic growth and renewable energy.The obtained results reveal a long-term equilibrium among the variables.The panel FMOLS results indicate that all the variables are statistically significant at 1% and 10% level,except for urban population and the coefficient can be interpreted as elasticity.The outcomes indicate that there is a strong long-run linkage among the variables.iii)Regarding the direction of causality,a unidirectional causality running from economic growth towards agricultural growth was discovered in this study using the Granger causality test.It suggests that energy consumption plays a crucial role in economic growth both directly and indirectly as a complement to labor and capital in the production process.No causality was established between electricity consumption and economic growth,which support the neutrality hypothesis.In this instance,energy conservation policies dedicated to reducing energy consumption will not have any effect on economic growth.The policy suggestion is that measures adopted to mitigate the adverse effect of energy consumption may be taken without damaging economic growth.The observed results of this study offer policymakers a better thoughtful of energy consumption-economic growth nexus to formulate energy policies in these countries.There is evidence of bidirectional causality between fossil fuels and economic growth.This hypothesis asserts that there exists bidirectional causality between energy consumption and economic growth.This hypothesis implies that energy conservation policy will negatively affect economic growth whereas an increase in economic growth will also increase energy consumption.Energy consumption has a positive effect on economic growth and the obtained results are consistent with other studies reviewed in this study.Policies have been recommended in this study that could be carried by government officials and policy makers of BRICS countries to support economic development.The outcomes of this study have significant policy implications and it shows that the issue still warrants further attention in future research.