Clean energy consumption and economic growth nexus: asymmetric time and frequency domain causality testing in China

ABSTRACT

This article examines the symmetric and asymmetric causal relationships between clean energy consumption and economic growth in time and frequency domains for China. The results of both symmetric and asymmetric causality analysis suggest that clean energy consumption does not cause economic growth. This implies that the level of clean energy consumption in China seems to be optimal and beyond this level, it does not affect the growth level of the country. However, examination of the causality linkage from economic growth to clean energy consumption indicates medium and long-run evidence of a frequency-based symmetric causal relationship. Our asymmetric analysis makes this relation clearer such that only the adverse shocks to economic growth lead to a decline in the clean energy consumption level. This inference is complemented with the estimated causal parameter of 0.13, indicating that a 1% decrease in economic growth results in a 0.13% reduction in the level of clean energy consumption.