Modelling Renewable Energy Consumption and Economic Growth in Uganda

Abstract

This study models renewable energy consumption and economic growth, with evidence from Uganda (1982-2018). The hypothesis that explains causality between renewable energy consumption and economic growth follows the growth, conservation, feedback and neutral. The study uses vector error correction model (VECM) and structural vector auto regression (VAR), within a multivariate data framework. The Pairwise Granger test was specifically used to establish the direction of causality between variables of study. The Johansen co-integration test was carried out to ascertain if there exists a long run relationship between renewable, domestic investment, foreign direct investment and real GDP. The results support the neutral hypothesis between renewable energy consumption and economic growth. The conclusion therefore is a unidirectional relationship running from of renewable energy consumption to economic growth.This paper provides insights into how renewable energy consumption drives economic growth and sustainable development.