The Electricity Consumption-Growth Nexus: Renewable Versus Non-Renewable Electricity in Central America

Abstract This study investigates the Granger-causal relationship between renewable and non-renewable electricity consumption and economic growth in the case of Central America within a panel error correction model framework. Larsson et al. (2001) Larsson, R., Lyhagen, J. and Lothgren, M. 2001. Likelihood-based cointegration tests in heterogeneous panels. Economet. J., 4: 109–142. [Crossref] , [Google Scholar] panel cointegration test reveals a long-run equilibrium relationship between real gross domestic product, renewable electricity consumption, non-renewable electricity consumption, real gross fixed capital formation, and the labor force. With the exception of renewable electricity consumption, the respective long-run coefficient estimates are positive and statistically significant. The results from the panel error correction model indicate unidirectional causality from renewable electricity consumption to economic growth in the short-run, but bidirectional causality in the long-run. The results also indicate bidirectional causality between non-renewable electricity consumption and economic growth in both the short-run and long-run.

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