Analyzing long-term empirical interactions between renewable energy generation, energy use, human capital, and economic performance in Pakistan

Background: The current research attempts to systematically investigate the causal interactions between renewable energy generation, aggregated energy use, human capital, and economic performance in Pakistan both in a short-term and long-term test for the period of 1990-2016. Methods: As a primary step, a unit root analysis was conducted employing, among others, an augmented Dickey-Fuller-generalized least squares (ADF-GLS) test. Based on the order of integration I(1), the Johansen and Juselius (JJ) co-integration testing was employed to confirm a long-term causality analysis, which was followed by a vector error correction model (VECM) to calculate the short-run Granger causality analysis. Furthermore, the vector autoregressive (VAR)-based Cholesky test allowed the standard deviation impulse response functions to be generated to explain the responses of variables to arbitrary shocks in the data series under analysis. Results: The empirical findings unearthed the bilateral causal connection between aggregated energy use and economic performance, renewable energy generation and economic performance, and human capital and economic performance. Thus, it confirmed the existence of feedback effects for aggregated energy use, renewable energy generation, and human capital in their relation to economic performance. Likewise, a unilateral positive causal connection was revealed running from renewable energy generation and human capital to aggregated energy use, and from human capital to renewable energy generation in both a long-term and short-term test. Additionally, the causal association running from aggregated energy use and renewable energy generation to economic performance was exposed in a long-term as well as short-term test, hence supporting the growth hypothesis. Conclusions: The findings signified the importance of an enhanced generation of renewable energy along with the promotion of an aggregated energy use for the economic performance in Pakistan.