The impact of renewable energy and non-renewable energy consumption on economic growth selected upper-middle income countries: A hidden cointegration approach

Energy is an important factor that is vital for the perpetuity of life and all living creatures. It is one of the fundamental sources that is necessary and needed to meet our basic needs. With the impact of industrial revolution and increasing population, the energy reality has been recognized. With the oil crisis appeared in 1973 and 1979, the importance of energy concept has increased and it has been the subject of academic studies by being associated with many issues. Energy, which is one of the main sources of sustainable growth, has not been evaluated as a production input by not being considered by traditional economic movements. However, after 1970, the economists in the ecological economics approach which is a new economic theory, evaluated energy as the primary source of economic growth. Due to the fact that non-renewable energy resources, which have become important for every sector of the economy with the oil crisis, are exhaustible and disturb ecological balance, countries have turned to renewable energy resources that are inexhaustible, clean, cheap and environmentally friendly by making amendments in their energy policies. In this study, the asymmetric relationship between renewable, nonrenewable energy consumption and economic growth in the selected mid-high income economies such as Turkey, China, Peru, Indonesia, Thailand, Colombia, Ecuador and Brazil has been analysed over the period of 1965-2018. DF-GLS, KPSS and Ng-Perron unit root analyses were performed and the variables were foud to be stationary at their first difference. The long-term relationship between the variables was analyzed by using the hidden cointegration test, which is one of the new generation tests. Long-term coefficients were analyzed by using the FMOLS estimator, and causality relations were examined by using asymmetric causality test based on crouching error-correction model. The results obtained from the empirical analyses were comparatively given with Turkey and other similar economies, the appropriate policy recommendations were presented.