Nonlinear Relationship between Economic Growth, Energy Price and Renewable Energy:The threshold regression approach

Document Type : Original Article

Authors

Department of Humanities, Gonbad-e kavous University, gonbad Kavous, Iran

Abstract

In this paper, using the threshold regression approach, the impact of energy prices on the development of renewable energy in different regimes of Iran's economic growth rate is examined. Experimental data from the Central Bank of Iran site was collected during the period (1360-1993). The results showed that there is a threshold in the regression relation, which equals 7.74% in annual rates of GDP growth. Based on the threshold value, the observations were divided into two regimes with low economic growth (economic growth below 7.74%) and high economic growth (economic growth above 7.74%). The findings show that there is a negative and significant relationship between the consumer price index and the share of renewable energy in the country during high economic growth. This can be due to unsustainable and cross-sectional economics, as well as a lack of proper management of resources due to increased energy-related revenues and subsidized energy, as well as the private sector's reluctance to use renewable energy with cheap fossil energy. Also, in Iran, in times of low economic growth, there is a negative relationship between economic growth and the share of renewable energies.

Keywords

References

[3] N. Apergis, J. E. Payne, Renewable energy consumption and economic growth: evidence from a panel of OECD countries, Energy policy, Vol. 38, No. l, pp. 656-660, 2010.
[4] I. Ozturk, A literature survey on energy—growth nexus, Energvpolicy, Vol. 38, No. 1, pp. 340-349, 2010.
[5] A. Omri, S. Daly, C. Rault, A. Chaibi, Financial development, environmental quality, trade and economic growth: What causes what in MENA countries, Energy Economics, vol. 48, pp. 242-252, 2015.
[6] B. N. Huang, M. J. Hwang, C. W. Yang, Does more energy consumption bolster economic growth? An application of the nonlinear threshold regression model, Energy Policy, Vol. 36, No. 2, pp. 755-767, 2008.
[7] S. Z. Chiou-Wei, C.F. Chen, Z. Thu, Economic growth and energy consumption revisited—evidence from linear and nonlinear Granger causality. Energv Economics, Vol. 30, No. 6, pp. 3063-3076, 2008.
[8] J. Park, T. Hong, Analysis of South Korea's economic growth, carbon dioxide emission, and energy consumption using the Markov switching model, Renewable and Sustainable Energy Reviews, Vol. 18, pp. 543-551, 2013.
[9] A. N. Ajmi, G. Montasser, DK. Nguyen, Testing the relationships between energy consumption and income in G7 countries with nonlinear causality tests, Economic Modelling, Vol. 35, No. 1, pp. 26-33, 2013.
[10] T. Dergiades, G. Martinopoulos, L. Tsoulfidis, Energy consumption and economic growth: Parametric and nonparametric causality testing for the case of Greece, Energv economics, Vol. 36, pp. 686-697, 2013.
[11] J. T. Mensah, Carbon emissions, energy consumption and output: A threshold analysis on the causal dynamics in emerging African economies, Energy Policy, Vol. 70, pp. 172-182, 2014.
[12] T. Chien, J. L. Hu, Renewable energy: An efficient mechanism to improve GDP, Energy Policy, Vol. 38, No. 8, pp. 3045-3052, 2008.
[13] S. Silva, I. Soares, C. Pinho, The impact of renewable energy sources on economic growth and C02 emissions-a SVAR approach, European Research Studies, Vol. 15, No. 4, pp.133-139, 2012.
[14] R. A. Salim, S. Rafiq, Why do some emerging economies proactively accelerate the adoption of renewable energy?, Energy Economics, Vol. 34, NO. 4, pp. 1051-1057, 2012.
[15] Y. Fang, Economic welfare impacts from renewable energy consumption: the China experience, Renewable and Sustainable Energy Reviews, Vol. 15, No. 9, pp. 5120-5128, 2011.
[16] A. K. Tiwari, A structural VAR analysis of renewable energy consumption, real GDP and C02 emissions: evidence from India, Economics Bulletin, Vol. 31, No. 2, pp. 1793-1806, 2011. 
[17] R. Sari, B.T. Ewing, U. Soytas, The relationship between disaggregate energy consumption and industrial production in the United States: an ARDL approach, Energy Economics, Vol. 30, No. 5, pp. 2302-2313, 2008.
[18] P. Sadorsky, Renewable energy consumption and income in emerging economies, Energy policy, Vol. 37, No. 10, pp. 4021-4028, 2009.
[19] R. zeb, L. salar, U. Awan, K. Zaman, M. Shahbaz, Causal links between renewable energy, environmental degradation and economic growth in selected SAARC countries: progress towards green economy, Renewable Energy, Vol. 71, pp. 123-132, 2014.
[20] T. H. Chang, C. M. Huang, M. C. Lee, Threshold effect of the economic growth rate on the renewable energy development from a change in energy price: Evidence from OECD countries, Energy Policy, Vol. 37, No. 12, pp. 57965802, 2009.
[21] F. Bilgili, Linear and nonlinear TAR panel unit root analyses for solid biomass energy supply of European countries, Renewable and Sustainable Energy Reviews, Vol. 16, No. 9, pp. 6775-6781, 2012.
[22] N. Apergis, J. E. Payne, Renewable energy, output, CO 2 emissions, and fossil fuel prices in Central America: evidence from a nonlinear panel smooth transition vector error correction model, Energy Economics, Vol. 42, pp. 226232, 2014.
[23] S. Awerbuch, R. Sauter, Exploiting the oil—GDP effect to support renewables deployment, Energy Policy, Vol. 34, No. 17, pp. 2805-2819, 2006.
[24] N. Nakicenovic, R. Swart, Emissions Scenarios. IPCC, Cambridge University Press, 2000. WG Ill.
[25] H. Askari, N. Krichene, Oil price dynamics (2002-2006), Energy Economics, vol. 30, No. 5, pp. 2134-2153, 2008.
[32] B. E. Hansen, Threshold effects in non-dynamic panels: Estimation, testing, and inference, Journal of econometrics, Vol. 93, No. , pp. 345-368, 1999.
[33] B. E. Hansen, Inference When a Nuisance Parameter is Not Identified Under the Null Hypothesis, Econometrica , Vol. 64, pp. 413-430, 1996.
[35] O. Ramphul, Renewable and Non-Renewable Energy. Consumption and Economic Growth in India, Energy .No.11, PP. 1050-1054, 2016.
Journal of Renewable and New Energy
Volume 4, Issue 2 - Serial Number 8
September 2017
Pages 82-90

Files

History

  • Receive Date: 31 January 2018
  • Accept Date: 16 March 2018

Share

How to cite

Statistics