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An empirical research on the relationship amongst renewable energy consumption, economic growth and foreign direct investment in China

Weiyang Fan and Hao Yu

Renewable Energy, 2020, vol. 146, issue C, 598-609

Abstract: China's economy has flourished since reform and opening up. At the same time, China's ability to attract foreign investment in the world continued to increase. However, with the rapid development of the economy, China's energy crisis and environmental pollution have been continuously deepened, exposing increasingly serious problems in the energy consumption structure. As a critical mean to address the environmental problems and achieve sustainable development, the production and utilization of renewable energy resources is particularly critical. This paper aims to investigate the relationship amongst renewable energy consumption, foreign direct investment and gross domestic product in 31 Chinese provinces from 2000 to 2015. Specifically, the unit root test, cointegration test, vector error-correction model, impulse response function analysis, and Granger causality test are employed for the estimations. The empirical results indicate that there is a long-term and stable equilibrium relationship between gross domestic product per capita, foreign direct investment per capita, and renewable energy consumption per capita. Additionally, in the short term, foreign direct investment cannot significantly cause renewable energy consumption change; but in the long run, a modest slowdown in gross domestic product growth and targeted foreign direct investment will generate a significant boost on renewable energy in China.

Keywords: Renewable energy; Economic growth; Foreign direct investment; Cointegration test; VECM; Granger causality test (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.renene.2019.06.170

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