Energy-growth hypothesis: testing non-linearity by considering production function approach for Spanish economy

Abstract

Targeting output growth is among one the prime concern of any economy in both developing and developed worlds. Energy utilization and exports are important drivers that would help in boosting production activities in any economy. Therefore, beyond labor force and capital formation, exports and energy utilization can be among the important inputs for accelerating economic growth in any economy. This research is conducted to investigate the linear impact of exports and the non-linear effect of energy consumption on economic growth considering the production function approach in the Spanish economy. After considering the ARDL bounds test for a period from 1980-2019, the study provides evidence of inverted-U shaped effects of energy consumption on economic growth. The ndings also expose that exports, labor force and capital formation signi cantly accelerate economic growth in Spain. These ndings are consistent with the diagnostics applied in the study. This research proposes that energy consumption should not be increased beyond a certain threshold for reaping positive fruits for economic growth. Beyond that cutoff, it will become harmful to economic growth. Policy advisors may consider exports to target economic growth in Spain as it helps in expanding production activities in the Spanish economy.