New insights into economic expansion in the United Kingdom: Does energy mix specificity matter?
Abstract
This paper sheds light on the causality linkages between economic growth and
energy production, that is, natural gas, bioenergy and waste, coal, nuclear, petroleum, wind, solar and hydro for the United Kingdom over the period 1998Q1 to
2017Q4. To this end, we apply time-domain causality tests—Toda-Yamamoto
causality test and gradual shift causality test, and frequency domain causality
(FDC) test for empirical analysis to sort out the causality among the outlined
variables under consideration. Empirical findings from the spectral BC causality
test reveal that (a) changes in energy production from natural gas and petroleum
spur significant changes in economic growth in the United Kingdom;
(b) economic growth causes energy production from natural gas, petroleum,
wind, solar, hydro and nuclear and (c) it is worthy of mentioning that time and
FDC tests provide consistent outcomes at different significance and frequency
levels. On the causality analysis, the hypothesis that natural gas triggers economic growth is valid, while the result also reveals a feedback causality the variables of concern. Similarly, economic growth drives nuclear energy production
one-way as well as total energy drives economic growth. These results provide
policy implications for energy and environmental sustainability in the United
Kingdom where renewable energy sources drive economic growth. Thus, necessitates the need to maintain the current trajectory for more renewable energy
promotion in energy mix relative to fossil-fuel energy sources.
Highlights
• Economic impact is revisited for the United Kingdom over the period
1998Q1 to 2017Q4.
• Toda-Yamamoto, gradual shift and frequency domain causality tests were
employed.
• Distinct roles of natural gas, fossil, nuclear and mix of renewables were
explored.
• Changes in natural gas and petroleum significantly spur economic growth.
• Frequency domain causality tests offer consistent time and frequency changes
Volume
45Issue
13Collections
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