Renewable energy, oil prices, and economic activity: A Granger-causality in quantiles analysis

Abstract

This paper analyzes the causal relationship between renewable energy consumption, oil prices, and economic activity in the United States from July 1989 to July 2016, considering all quantiles of the distribution. Although the concept of Granger-causality is defined for the conditional distribution, the majority of papers have tested Granger-causality using conditional mean regression models in which the causal relations are linear. We apply a Granger-causality in quantiles analysis that evaluates causal relations in each quantile of the distribution. Under this approach, we can discriminate between causality affecting the median and the tails of the conditional distribution. We find evidence of bi-directional causality between changes in renewable energy consumption and economic growth at the lowest tail of the distribution; besides, changes in renewable energy consumption lead economic growth at the highest tail of the distribution. Our results also support the unidirectional causality from fluctuations in oil prices to economic growth at the extreme quantiles of the distribution. Finally, we find evidence of lower-tail dependence from changes in oil prices to changes in renewable energy consumption. Our findings call for government policies aimed at developing renewable energy markets, to increase energy efficiency in the U.S.

The dynamic links among energy consumption, tourism growth, and the ecological footprint: the role of environmental quality in 38 IEA countries

“…Further, a 1% acceleration in tourism growth increases the economic growth of IEA countries by 34% in model I, while it decreases the EFP of IEA countries by 24% in model II. We found that both energy consumption and tourism growth are significant factors in the economic growth of IEA countries, a result that agrees with those of Adams et al ( 2018 ), Aydin ( 2019 ), Belaïd and Zrelli ( 2019b ), Mohamed et al ( 2019 ), Rahman and Velayutham ( 2020 ), Troster et al ( 2018 ), Vural ( 2020 ), and Zafar et al ( 2019 ). All these studies showed that energy consumption is compatible with economic growth.…”

The Economic Impact of Increasing International Dependence on Renewable Energy in Generating Energy on OPEC

“…The first strategy was to increase the share of oil supplied by OPEC, thereby reducing the price of oil, while the second strategy was to allow high-cost competitors to remain in the market and the result of the study was that when efficient members who are non OPEC members are more attractive to OPEC when they are not high in renewable energy production, consumers view both commodities as homogeneous products, in addition to that the pressure strategy stimulates more renewable energy production when the cost is low, and finally if non-OPEC countries can influence the price, the pressure strategy arises in light of Less demanding conditions when renewable energy is present. Another study by Troster, Victor and others [8] concluded that, the study has a causal relationship between renewable energy consumption, oil prices, and economic activity in USA from June 1989 to July 2016. The study found that there is a two-way causality between changes in renewable energy consumption and economic growth at the lowest quantities for distribution.…”

Asymmetric dynamics between uncertainty and unemployment flows in the United States

“…The most relevant advantages for our purposes are that it enables nonlinear quantile-regression specifications, it has good finite-sample power, and it is robust to nonnormality in the data. The following section follows closely the explanation of Granger causality in quantiles from Troster (2018) and Troster et al (2018). The reader is asked to consult these references for a detailed explanation of the methodology.…”