A multivariate analysis of the causal flow between renewable energy consumption and GDP in Tunisia

This paper examines the causality linkages between economic growth, renewable energy consumption, CO2 emissions and domestic investment in Tunisia between 1971 and 2010. Using the ARDL bounds testing approach to cointegration, long-run relationships between the variables are identified. On the other hand, the Granger causality analysis indicates that there is bi-directional causality between renewable energy consumption and economic growth, which supports the validity of the feedback hypothesis. In addition, the quantity of CO2 emissions collapses as a reaction to an increase in renewable energy consumption. These findings remain robust even when controlling for the presence of structural break. We conclude that more efforts should be undertaken to further develop a suitable infrastructure to the renewable energy sector, given its enhancing-effects on economic growth and reducing-effects on CO2 emissions.