Re-evaluating the dynamic role of shadow economy and environmental policy stringency in the energy-growth nexus in China

This paper examines the impact of shadow economy and environmental policy stringency on energy consumption and economic growth in the case of China for the period 1993 to 2019. Asymmetric ARDL empirical findings show that positive shocks in shadow economy and environmental policy stringency have a significant and positive impact on energy consumption and economic growth in the long run. However, the negative shocks in shadow economy exert positive and significant impacts on energy consumption and economic growth in the long run, but magnitudes are small compared to positive shocks. The long-run findings report no significant effect of negative shock in environmental policy stringency on energy consumption and economic growth. China should use environmental policy stringency as economic tools to maintain green economic growth and clean energy demand for sustained economic expansion. Policymakers should focus on the inclusion of environmental policy stringency in any future environment strategy.

Automated summary

The study shows that shadow economy and environmental policy stringency have significant impacts on energy consumption and economic growth in China, with a recommendation to use the latter as an economic tool for maintaining green economic growth.