Impact of urbanization, economic growth, FDI, and trade openness on energy demand in Ireland: an ARDL approach

Abstract

This research study uses an autoregressive distributed lag (ARDL) paradigm to examine the effects of trade openness, urbanization, economic growth, and foreign direct investment (FDI) on energy demand in Ireland. This thorough theoretical framework anticipates a relationship between energy demand and trade, foreign direct investment, and urbanization. This study demonstrates both short- and long-run cointegration among the variables employing an ARDL (autoregressive distributed lag) bounds-testing method for the data set period from 1972 to 2021. Additionally, Fully Modified Ordinary Least Square (FMOLS), Dynamic Ordinary Least Square (DOLS), and Canonical Cointegrating Regression (CCR) were utilized in the study to verify the results' robustness. Nonetheless, this analysis discovers that trade openness and rising GDP (Gross Domestic Product) per capita increase energy consumption. The results show that for every 1% increase in GDP, energy consumption increases by 0.967%. On the flip side, energy consumption in Ireland is declining due to increased urbanization and foreign direct investment. The results show that for every 1% increase in urbanization, energy usage decreases by 1.738%. The investigation shows that Ireland's energy usage is strongly impacted by trade liberalization, FDI, urbanization, and economic expansion. Findings like these can help policymakers and stakeholders manage and optimize energy usage in the context of urbanization, economic expansion, foreign direct investment, and global trade. The report recommends sustainable energy planning and policy initiatives to strike a healthy balance between meeting the increasing demand for energy and protecting the environment.