Nexus between Economic Policy Uncertainty and Renewable Energy Consumption in BRIC Nations: The Mediating Role of Foreign Direct Investment and Financial Development

Yongliang Zhang, Md. Qamruzzaman, Salma Karim and Ishrat Jahan
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Yongliang Zhang: School of Management, China University of Mining and Technology-Beijing, Beijing 100083, China
Md. Qamruzzaman: School of Business and Economics, United International University, Dhaka 1212, Bangladesh
Salma Karim: School of Business and Economics, United International University, Dhaka 1212, Bangladesh
Ishrat Jahan: School of Business and Economics, United International University, Dhaka 1212, Bangladesh

Energies, 2021, vol. 14, issue 15, 1-29

Abstract: In recent literature, the impact of economic policy uncertainty ( EPU ) on macro aspects have been investigated, but the aspect of energy, precisely renewable energy still to explore. The motivation of the study is to produce fresh evidence regarding the nexus between EPU and renewable energy consumption ( REC ) with the mediating role of forcing direct investment ( FDI ) and financial development ( FD ) in BRIC nations for the period 1997q1–2018q4. The study applied unit root tests following Ng-Perron and Zivot and Andrews for detecting variable’s stationary properties. The long-run cointegration was evaluated by implementing Bayer, Hanck combined the cointegration test, Bound testing approach, and t BDM test. Both linear and non-linear ARDL were implemented to evaluate long-run and short-run shocks, and directional causality was assessed through a non-granger causality test. Furthermore, the study implemented robustness by implementing fully-modified OLS, dynamic OLS, and canonical cointegrating regression (CCR). Unit root test established the variables are stationary after the first difference; moreover, the Bayer and Hanck cointegration test confirmed the long-run association between EPU , FD , FD , and REC in BRIC nations. Accruing to ARDL estimation, adverse effects running from EPU to REC both in the long run and short run. Furthermore, the positive statistically significant linkage revealed for FDI and FD to REC implies that clean energy integration could be augmented with continual inflows of FDI and development of the financial sector. Model estimation with asymmetric assumption, the study documented asymmetric effects running from EPU , FDI , and FD to renewable energy consumption, especially in the long run. Finally, the directional causality revealed unidirectional causality between REC and EPU, whereas the feedback hypothesis was disclosed for FDI and REC ] and FD and REC . Study findings postulated that the role of foreign direct investment and financial development is critically significant because technological advancement and capital investment augment clean energy integration through the application of renewable energy.

Keywords: economic policy uncertainty; renewable energy consumption; foreign direct investment; financial development; BRIC (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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