RENEWABLE ENERGY AND ECONOMIC PERFORMANCE: ASSESSING THE IMPACT OF GREEN CONSUMPTION ON PER CAPITA GROWTH

Abstract

This study examines the dynamic relationship between renewable energy consumption, financial access (proxied by credit to the private sector), and per capita economic growth across a panel of 34 countries from 2000 to 2023. Grounded in the frameworks of endogenous growth theory and the Green Solow Model, the research applies advanced panel econometric techniques including Levin-Lin-Chu and IPS unit root tests, Westerlund ECM cointegration analysis, and Pooled Mean Group regression. The findings reveal a significant long-run cointegrated relationship among the variables. In the short run, both renewable electricity output and private sector credit exert statistically significant negative effects on economic growth, indicating the presence of transitional costs or institutional inefficiencies. In the long run, renewable energy exhibits a positive but statistically insignificant impact on growth, while private sector credit shows a robust negative effect, suggesting potential credit misallocation or structural rigidities. The study contributes to the energy-growth-finance literature by integrating green consumption and financial development within a unified empirical model and by highlighting the role of policy context in shaping the economic impacts of clean energy and financial flows. Using the results, strategies are suggested to support green finance, better organize the use of credit and regulate the abrupt effect of moving to renewable resources. Such findings are especially important for countries looking to combine sustainable development with financial and energy sector improvements.

Keywords:
Renewable Energy, Economic Growth, Green Finance, Credit to Private Sector, Panel Data, PMG Estimation, Cointegration, Sustainable Development, Financial Intermediation,