Contemporary Energy Issues: The Roles of Democracy, Economic Policy Uncertainty and the Real Sector

The first essay revisits the position of the EKC hypothesis by incorporating the role of energy consumption and democracy in the environmental degradation function for a panel of nine countries between 1990 and 2014.Using Pooled Mean Group (PMG) methodology and Emirmahmutoglu and Kose (2011) Granger causality test, the results validate the EKC hypothesis in the long run. It also confirms that energy consumption significantly increases CO2 emissions in the long-run and short-run, while the effect of democracy in reducing CO2 emissions is statistically significant both in the short-run and in the long-run. The finding from the Granger causality test indicates two-way causal effects in the relationships of economic growth, its squared term and democracy with environmental degradation. Furthermore, there is two-way causality between democracy and income per capita terms and between energy consumption and income per capita. The study, therefore, recommends the need to strengthen democracy and promote stringent environmental policies that guarantee clean energy as a sure way to achieving economic growth despite rising energy consumption, without jeopardizing the quality of life. The second essay examines the asymmetric causality effects in the relationship between prices of gasoline and economic policy uncertainty. A panel of 18 countries were examined within the period 1998-2017, with the application of a recently introduced panel causality approach by Hatemi-J et al (2016) because of its ability to show the asymmetric dynamics in the system and its efficiency against cross-sectional dependence and slope heterogeneity. Results reveal asymmetric causal relationships between gasoline prices and economic policy uncertainty in the sampled countries. Specifically, results show that economic policy uncertainty and gasoline prices have positive and negative asymmetric bidirectional causality in 13 countries. No feedback causal relations were detected between gasoline prices and economic policy uncertainty in five countries. Based on the results, it can be inferred that positive and negative asymmetric causality exist between economic policy uncertainty and gasoline prices. The final essay investigates the long-run relationship between oil price and agricultural productivity for India while disaggregating agricultural productivity into food and non-food production. Having applied four major cointegration tests via a technique that was the recently developed by Bayer-Hanck, significant cointegrating relationships are confirmed. However, long-run estimations show that the effect of oil price on both food and non-food agricultural production is insignificant but there is a short-run and long-run positive effect of gross capital formation on agricultural production, while inflation has a negative effect on agriculture only in the short-run. This suggests huge capital formation drives the agricultural sector in India, and not oil energy input. The conditional Granger causality result shows that there is no causal relationship between oil price and agricultural production but bi-directional causality runs between gross capital formation and agricultural production, while oil price has causal effects on capital formation. The study, therefore, implies that agricultural sector will cope in the case of oil price crises because its productivity is independent of oil price changes. This also suggests that there are alternative energy inputs which might be more important than oil in India’s agricultural industries. Keywords: Asymmetric causality, Democracy, Economic policy uncertainty, Energy consumption, Environmental degradation, Food and non-food production, Gasoline prices, Granger causality, Oil price, Long-run relationships, Real sector