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Is Renewable Energy Consumption Effective to Promote Economic Growth in Pakistan: Evidence from Bounds Testing and Rolling Window Approach

Muhammad, Shahbaz and Qazi, Muhammad Adnan Hye and Muhammad, Zeshan (2012): Is Renewable Energy Consumption Effective to Promote Economic Growth in Pakistan: Evidence from Bounds Testing and Rolling Window Approach.

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Abstract

The aim of present study is to re-investigate the impact of renewable energy consumption on economic growth by incorporating capital and labor as potential determinants of production function in case of Pakistan. We have used the ARDL bounds testing and rolling window approach (RWA) for cointegration. The causality analysis is conducted by applying the VECM Granger causality and innovative accounting approaches.

The results showed that all the variables are cointegrated for long run relationship. Renewable energy consumption, capital and labor boost economic growth. The causality analysis indicated bidirectional causality between economic growth, renewable energy consumption and capital over the period of 1972Q1-2011Q4. The study opens up new directions for policy makers to explore new sources of energy sustain economic growth.

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