Asymmetric connectedness between oil price, coal and renewable energy consumption in China: Evidence from Fourier NARDL approach

This paper examines the asymmetric effects of oil price shocks on coal and renewable energy consumption in China over long and short periods. The novelty of this study is to investigate whether the consumption of coal and renewable energy are asymmetrically affected by the oil price in a time-frequency framework by performing a Fourier nonlinear ARDL model which is robust to overcome the multiple smooth structural changes in data. The bounds test of the FNARDL specification provide strong evidence of cointegration among variables, including coal energy consumption, renewable energy consumption, oil price, and economic growth. Results reveal the following: First, the oil price-coal energy consumption and oil price-renewable energy consumption relationships are nonlinear. Second, oil price increases have significant short-run effects on coal energy consumption. However, oil price increases induce an increase in renewable energy consumption in China in both the short and the long term. Finally, the relationship between coal energy consumption and economic growth is U-shaped. Hence, increasing oil prices boost China's prospects for coal in the short term and its usage of renewable energy in the long run.

Automated summary

This paper examines the asymmetric effects of oil price shocks on coal and renewable energy consumption in China. The results show that oil price increases have significant short-term effects on coal energy consumption, but have a positive long-term impact on renewable energy consumption. Additionally, the relationship between coal energy consumption and economic growth follows a U-shaped pattern.