Renewable energy consumption and economic growth in East Africa community

Abstract

This research investigates the link between the use of renewable energy and economic growth in six East African nations from 2000 to 2022 using a multivariate panel data approach. After extensive discussion, Mohammad H. Pesaran, Yongcheol Shin, and Ron P. Smith (1999) created the pooled mean group (PMG) estimation model to evaluate the validity of the results. The PMG estimator enforces consistent long run connections across countries while allowing for variation in short run responses and intercepts, allowing for greater parameter heterogeneity than the conventional estimator procedures employed in empirical growth research. The heterogeneous panel cointegration test indicates that real GDP, renewable energy consumption, real gross fixed capital formation, and labor force all show long-run equilibrium correlations. The results of the error correction models demonstrate a causal relationship between the use of renewable energy and economic expansion in both the short- and long-term. Thus, the empirical findings support the feedback hypothesis that the adoption of renewable energy sources and economic expansion are mutually dependent. These findings indicate the effectiveness of government initiatives that promote the use of sources of renewable energy by developing markets for those sources, as well as renewable energy portfolio standards are favorable from both a macroeconomic and environmental perspective. This study does not suggest any new macroeconomic policies; it just provides evidence that measures in favor of renewable energy sources would, at the very least, not negatively affect the economies of the countries.