Renewable and nonrenewable energy production and economic growth in sub-Saharan Africa: a hidden cointegration analysis

Abstract

The objective of this article is to investigate the hypothesis of asymmetric effects between economic growth and renewable and nonrenewable energy production. To this end, both the linear cointegration and the hidden cointegration methodology are employed, with the latter allowing a straightforward delimitation of the data in an economically sensible way. We test for the presence of hidden cointegration across 12 sub-Saharan African countries spanning the period 1971–2011. The empirical results confirm the growth hypothesis for a subset of countries, suggesting that their growth could be adversely affected by conservation policies, while for a second subgroup of countries they confirm the conservation hypothesis, indicating that conservation policies could enhance the growth process in these countries. The differentiation of the results could be captured entirely by the linear approach, indicating that the lack of cointegration between renewable energy production and economic growth found in previous studies may be due to failures to properly delimit the nonlinearity property in the data.

Keywords:

• renewable and nonrenewable energy production
• economic growth
• hidden cointegration

JEL Classification:

• C22
• Q43
• Q20

Acknowledgement

The authors wish to thank an anonymous referee for her/his comments and suggestions on an earlier version of the article that significantly improved the merit of the article. Needless to say, the usual disclaimer applies.

Notes

¹ A comprehensive review of literature is provided in Tiwari (2012).

² Note that each variable may have a distinct threshold. The use of a common threshold here is for expository purposes only. In the data analysis, we relax this assumption.

³ In the subsequent analysis, we refer to the positive component of energy production as energy utilization and to the negative component as energy conservation. Likewise, we refer to the positive component of economic growth as economic expansion and to the negative component as economic contraction.