Impact of renewable energy consumption on economic growth in Azerbaijan: New generation augmented ARDL Bound Test approach

This study examines the impact of imports, exports, renewable and non-renewable energy consumption on GDP in Azerbaijan. The research was conducted using annual data for the period 1990-2022. In the study, for the first time, the stationarity of variables in Azerbaijan was investigated with the Fourier approach suggested by Enders and Lee (2012) and Omay (2015). Furthermore, it is aimed to contribute to the literature by employing the Augmented ARDL Bounds Test proposed by Sam et al. (2019) for the co-integration relationship. As a result of the stationarity analysis, it has been found that all variables except for non-renewable energy consumption are stationary at levels. The stationarity analysis results indicate that all variables are stationary at the level except for non-renewable energy consumption. Subsequently, the Augmented ARDL Bounds Test was employed to identify the co-integration relationship among the variables. According to the long-run estimation results of the Augmented ARDL, it is observed that imports, exports, renewable, and non-renewable energy consumption positively affect GDP in Azerbaijan. A 1% increase in imports and exports has been found to lead to a respective increase of approximately 0.12% and 0.33% in Azerbaijan's economic growth on average. Furthermore, a 1% increase in non-renewable and renewable energy consumption has been determined to cause a respective increase of approximately 0.37% and 0.17% in Azerbaijan's economic growth on average. Additionally, the Fourier Toda-Yamamoto causality test proposed by Nazlioglu et al. (2016) was utilized to determine the causality between variables, revealing a unidirectional causality from imports and exports to economic growth in Azerbaijan. The study is concluded by offering various policy recommendations for Azerbaijan.