Researchers Deka, Özdeşer and Seraj from Economics Department, Near East University have conducted a study examining the intricate relationship between primary energy supply and economic growth (EG) within the European Union (EU). The research, spanning from 1990 to 2019 and encompassing data from 27 EU countries, employs advanced econometric techniques such as Dynamic Generalised Method of Moments, Fully Modified Ordinary Least Squares (FMOLS), and Dynamic Ordinary Least Squares (DOLS) to analyze the dynamics.
Contrary to some previous findings, this study delves deeper by considering the interaction between energy and capital, termed as “effective capital,” marking its novelty. Results indicate that factors such as carbon emissions, renewable energy (RE), capital, effective capital, and population size exert a significant positive influence on GDP across EU-27 countries. Notably, while primary energy supply initially exhibits a negative effect on GDP, the DOLS technique reveals a significant positive impact.
The study underscores the pivotal role of factors like labor force, capital, RE, and effective capital in driving economic growth while cautioning against the use of non-renewable energy (NRE) due to its adverse impact on carbon emissions. It emphasizes the symbiotic relationship between energy use and capital, advocating for the adoption of sophisticated, environmentally-friendly energy sources like RE to fuel production processes.
Acknowledging its limitations in overlooking other drivers of EG such as human capital and technological progress, the study remains robust, drawing from a vast panel dataset and employing rigorous econometric methodologies. Despite these limitations, the findings provide valuable insights applicable not only to developed countries but also potentially to developing nations and emerging economies.
For future research endeavors, the study suggests extending the analysis to include additional variables and exploring similar dynamics in developing countries. By broadening the scope and incorporating factors like human capital and technological advancements, future studies can further enhance our understanding of the intricate relationship between energy supply and economic growth.
More Information:
https://www.sciencedirect.com/science/article/pii/S0960148123013654
