THE INCOME THRESHOLD IN THE ENERGY-GROWTH NEXUS: A PANEL GMM ANALYSIS OF RENEWABLE ENERGY IN DEVELOPING ECONOMIES

Abstract

This is an empirical study that examines the dynamic relationship between renewable energy consumption and economic growth in ten developing economies between 2000 and 2023 with financial development as a mediating variable and national income level as a moderating factor. The study is based on the Endogenous Growth Theory, with a detailed panel data approach, applying the System Generalized Method of Moments (GMM) to endogeneity, as well as cointegration tests and quantile regression to guarantee the strength of the study. The results indicate that there is a statistically significant and positive direct effect of the consumption of renewable energy on economic growth, which proves the contribution of clean energy to sustainable development. Nevertheless, the mediating effect of financial development as hypothesized is not found, which indicates that there are more complex or indirect transmission channels in the sampled countries. It is interesting to note that income level is a major positive moderator, which means that developing countries with higher income levels enjoy much more economic gains due to the adoption of renewable energy than their counterparts with lower income. These findings indicate the contingency and contextuality of the energy-growth nexus, which emphasizes the significance of economic development phases in the development of renewable energy policy. The paper ends with implications of customized, income-sensitive energy policies and improved financial system reforms to successfully utilize renewable investments to achieve long-term economic development.