Exploring non-linear causal nexus between economic growth and energy consumption across various R&D regimes: cross-country evidence from a PSTR model

Mohsen Khezri, Jamal Mamkhezri and Almas Heshmati ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Purpose: This study endeavors to elucidate the divergent conclusions encountered in empirical research regarding the interplay of Economic Growth (EG) and Energy Consumption (EC). Design/methodology/approach: For this purpose, we employ the Panel Smooth Threshold Regression (PSTR) model to intricately examine the non-linear impacts of independent variables on EC and EG within a dataset encompassing 46 countries over the period from 1996 to 2021. Findings: The outcomes of our investigation can be summarized as follows: First, the findings underscore the positive impact of the logarithm of net capital formation on EG. This impact is particularly pronounced at low levels of Research and Development (R&D), gradually waning beyond a certain threshold. Second, the ratio of capital to labor exhibits a negative influence on EC at lower R&D levels. Notably, these detrimental impacts become more pronounced as R&D levels increase. Third, trade openness contributes positively to EG, particularly evident at low R&D levels. However, with increasing R&D levels, the incremental benefits from trade diminish. Finally, our findings lend support to the feedback hypothesis. Nevertheless, the impact of R&D expenditures in countries moderates these positive effects. Practical implications: Policymakers should strategically balance resource allocation between capital formation and research endeavors, considering diminishing returns at elevated levels of R&D spending, to ensure sustained EG.

Keywords: economic growth (EG); energy consumption (EC); panel smooth threshold regression (PSTR) model; R&D spending (search for similar items in EconPapers)
JEL-codes: F43 O32 O40 O47 Q41 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2024-05-01
New Economics Papers: this item is included in nep-ene and nep-tid
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Published in Energy Economics, 1, May, 2024, 133. ISSN: 0140-9883

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Journal Article: Exploring non-linear causal nexus between economic growth and energy consumption across various R&D regimes: Cross-country evidence from a PSTR model (2024)
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