In a multivariate setting, we document that renewable energy generation has a positive impact on economic growth at the regional level in Italy. We do so by adopting panel data unit-root and cointegration tests as well as Granger non-causality tests relying on the system GMM estimator. Our results are interpreted in three ways. Renewable energy generation alleviates balance-of-payments constraints and reduces the exposure of a regional economy to the volatility of the price of fossil fuels and to negative environmental and health externalities deriving from non-renewable energy generation. Therefore, our evidence supports policies promoting renewable energy generation. In an Appendix we show that our results are robust to the adoption of alternative econometric methods and definitions for our energy variable. They are also stable over time.
- economic growth
- Granger Causality
- panel error correction model
- panel unit root and cointegration tests
- Renewable energy generation