Analysis on the impact of investments, energy use and domestic material consumption in changing the Romanian economic paradigm
Abstract
The main aim of the paper is to assess the impact of fix capital, energy use and domestic material consumption in changing the inland Romanian economic paradigm, from an economic perspective, using the intensive form of the Cobb-Douglas function. In order to identify various connections of economic growth, sustainable development, energy usage has determined the application of the vector error correction (VEC) model and the implied error correction term (ECT). This method was chosen based on the premise that it has a high degree of applicability and it can be used in order to revile significant aspects terms of indicator significance and displays. The results obtained during the research confirm that both in Romania and at EU-28 level there are determinant and significant elements shaping a proactive economic policy.
Keyword : economic development, energy use, fixed capital stock, domestic material consumption, Cobb-Douglas, technological changes, economic policy
How to Cite
Popescu, G. H., Andrei, J. V., Nica, E., Mieilă, M., & Panait, M. (2019). Analysis on the impact of investments, energy use and domestic material consumption in changing the Romanian economic paradigm. Technological and Economic Development of Economy, 25(1), 59-81. https://doi.org/10.3846/tede.2019.7454
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Ahmed, M., & Azam, M. (2016). Causal nexus between energy consumption and economic growth for high, middle and low income countries using frequency domain analysis. Renewable and Sustainable Energy Reviews, 60, 653-678. https://doi.org/10.1016/j.rser.2015.12.174
Al-mulali, U., Lee, J. Y. M., Mohammed, A. H., & Sheau-Ting, L. (2013). Examining the link between energy consumption, carbon dioxide emission, and economic growth in Latin America and the Caribbean. Renewable and Sustainable Energy Reviews, 26, 42-48. https://doi.org/10.1016/j.rser.2013.05.041
Amri, F. (2016). The relationship amongst energy consumption, foreign direct investment and output in developed and developing countries. Renewable and Sustainable Energy Reviews, 64, 694-702. https://doi.org/10.1016/j.rser.2016.06.065
Andrei, J.-V., Mieilă, M., Popescu, G., Nica, E., & Manole, C. (2016). The impact and determinants of environmental taxation on economic growth communities in Romania. Energies, 9(11), 902. https://doi.org/10.3390/en9110902
Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error component models. Journal of Econometrics, 68(1), 29-51. https://doi.org/10.1016/0304-4076(94)01642-D
Barelli, P., & Abreu Pessoâ, S. (2003). Inada conditions imply that production function must be asymptotically Cobb–Douglas. Economics Letters 81(3), 361-363. https://doi.org/10.1016/S0165-1765(03)00218-0
Bastola, U., & Sapkota, P. (2015). Relationships among energy consumption, pollution emission, and economic growth in Nepal. Energy, 80(1), 254-262. https://doi.org/10.1016/j.energy.2014.11.068
Brown, R. L., Durbin, J., & Evans, J. M. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society. Series B (Methodological), 149-192.
Christiaans, T. (2011). Semi-endogenous growth when population is decreasing. Economics Bulletin, 31(3), 2667-2673.
Clark, J. (2017). Environmental Protection in Transition: Economic, Legal and Socio-Political Perspectives on Poland. UK: Taylor & Francis. https://doi.org/10.4324/9781315256269
Constantini, V., & Martini, C. (2010). The causality between energy consumption and economic growth: a multi-sectoral analysis using non-stationary cointegrated data. Energy Economics, 32(3), 591-603. https://doi.org/10.1016/j.eneco.2009.09.013
Costanza, R., Hart, M., Talberth, J., & Posner, S. (2009). Beyond GDP: The need for new measures of progress (The Pardee papers No. 4). Boston University.
Eurostat (2018). The domestic material consumption (DMC). Retrieved 02 February 2018 from http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=t2020_rl110
Granger, C. W. (2003). Some aspects of causal relationships. Journal of Econometrics, 112(1), 69-69. https://doi.org/10.1016/S0304-4076(02)00148-3
Hansen, B. E. 1992. Tests for parameter instability in regressions with 1(1) processes. Journal of Business & Economic Statistics, 10(3), 321-335.
Huang, B. N., Hwang, M. J., & Yang, C. W. (2008). Causal relationship between energy consumption and GDP growth revisited: a dynamic panel data approach. Ecological Economics, 67(1), 41-54. https://doi.org/10.1016/j.ecolecon.2007.11.006
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53-74. https://doi.org/10.1016/S0304-4076(03)00092-7
International Labour Organization [ILO]. (2018). Retrieved 03 Martch 2018 from https://www.ilo.org/
Inada, K.-I. (1963). On a two-sector model of economic growth: comments and a generalization. Review of Economic Studies 30(2), 119-127. https://doi.org/10.2307/2295809
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2-3), 231-254. https://doi.org/10.1016/0165-1889(88)90041-3
Lan-yue, Z., Yao, L., Jing, Z., Bing, L., Ji-min, H., Shi-huai, D., ...& Yuan-wei, L. (2017). The relationships among energy consumption, economic output and energy intensity of countries at different stage of development. Renewable and Sustainable Energy Reviews, 74, 258-264. https://doi.org/10.1016/j.rser.2017.02.055
Mirza, F. M., & Kanwal, A. (2017). Energy consumption, carbon emissions and economic growth in Pakistan: dynamic causality analysis. Renewable and Sustainable Energy Reviews, 72, 1233-1240. https://doi.org/10.1016/j.rser.2016.10.081
Narayan, P. K., & Smyth, R. (2008). Energy consumption and real GDP in G7 countries: new evidence from panel cointegration with structural breaks. Energy Economics, 30(5), 2331-2341. https://doi.org/10.1016/j.eneco.2007.10.006
Narayan, S., & Doytch, N. (2017). An investigation of renewable and non-renewable energy consumption and economic growth nexus using industrial and residential energy consumption. Energy Economics, 68, 160-176. https://doi.org/10.1016/j.eneco.2017.09.005
National Institute of Statistics of Romania [NIS]. (2018). Retrieved 03 March 2018 from http://www.insse.ro
Panayotou, T. (2016). Economic growth and the environment. In N. Haenn, A. Harnish, R. Wilk (Eds.), The environment in anthropology (2nd ed., pp.140-148). New York: NYU Press.
Pang, R. Z., Deng, Z. Q., & Hu, J. L. (2015). Clean energy use and total-factor efficiencies: An international comparison. Renewable and Sustainable Energy Reviews, 52, 1158-1171. https://doi.org/10.1016/j.rser.2015.08.002
Payne, J. E. (2010). A survey of the electricity consumption-growth literature. Applied Energy, 87(3), 723-731. https://doi.org/10.1016/j.apenergy.2009.06.034
Phillips, P., & Hansen, B. E. (1990). Statistical inference in instrumental variables regression with I(1) processes. Review of Economic Studies, 57(1), 99-125. https://doi.org/10.2307/2297545
Popescu, G., Mieilă, M., Nica, E., & Andrei J.-V. (2018). The emergence of the effects and determinants of the energy paradigm changes on European Union economy. Renewable and Sustainable Energy Reviews, 81(Part1), 768-774. https://doi.org/10.1016/j.rser.2017.08.055
Sachs, W. (2015). Planet dialectics: Explorations in environment and development. UK, London: Zed Books Ltd.
Santos, J., Domingos, T., Sousa, T., & St Aubyn, M. (2018). Useful exergy is key in obtaining plausible aggregate production functions and recognizing the role of energy in economic growth: Portugal 1960–2009. Ecological Economics, 148, 103-120. https://doi.org/10.1016/j.ecolecon.2018.01.008
Shahbaz, M., Jam, F. A., Bibi, S., & Loganathan, N. (2016). Multivariate Granger causality between CO2 emissions, energy intensity and economic growth in Portugal: Evidence from cointegration and causality analysis. Technological and Economic Development of Economy, 22(1), 47-74. https://doi.org/10.3846/20294913.2014.989932
Soava, G., Mehedintu, A., Sterpu, M., & Raduteanu, M. (2018). Impact of renewable energy consumption on economic growth: evidence from European Union countries. Technological and Economic Development of Economy, 24(3), 914-932. https://doi.org/10.3846/tede.2018.1426
Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics 70(1), 65-94. https://doi.org/10.2307/1884513
Stern, D. I. (2000). A multivariate cointegration analysis of the role of energy in the US macroeconomy. Energy Economics, 22(2), 267-283. https://doi.org/10.1016/S0140-9883(99)00028-6
Stresing, R., Lindenberger, D., & Kümmel, R. (2008). Cointegration of output, capital, labor, and energy. The European Physical Journal B, 66(2), 279-287. https://doi.org/10.1140/epjb/e2008-00412-6
Sturm, J.-E., De Haan, J. (2006). Public capital spending in The Netherlands: developments and explanations. Applied Economics Letters 5(1), 5-10. https://doi.org/10.1080/758540117
Tiba, S., & Frikha, M. (2018). Income, trade openness and energy interactions: Evidence from simultaneous equation modeling. Energy, 147, 799-811. https://doi.org/10.1016/j.energy.2018.01.013
Tiba, S., Omri, A., & Frikha, M. (2016). The four-way linkages between renewable energy, environmental quality, trade and economic growth: A comparative analysis between high and middle-income countries. Energy Systems, 7(1), 103-144. https://doi.org/10.1007/s12667-015-0171-7
Wei, T. (2007). Impact of energy efficiency gains on output and energy use with Cobb–Douglas production function. Energy Policy, 35(4), 2023-2030. https://doi.org/10.1016/j.enpol.2006.08.009
Wood, J. C., & Woods, R. N. (1989). Sir John R. Hicks: Critical assessments. London: Rutledge.
World Bank Database. (2018a). Retrieved 03 March 2018 from https://data.worldbank.org/indicator/EG.USE.PCAP.KG.OE?locations=RO
World Bank Database. (2018b). Retrieved from https://data.worldbank.org/indicator/NY.GDP.PCAP.KN?locations=RO
Zaharia, M., Pătrașcu, A., Gogonea, M. R., Tănăsescu, A., & Popescu, C. (2017). A cluster design on the influence of energy taxation in shaping the new EU-28 economic paradigm. Energies, 10(2), 257. https://doi.org/10.3390/en10020257
Zhixin, Z., & Xin, R. (2011). Causal relationships between energy consumption and economic growth. Energy Procedia, 5, 2065-2071. https://doi.org/10.1016/j.egypro.2011.03.356
Zilio, M., & Recalde, M. (2011). GDP and environment pressure: the role of energy in Latin America and the Caribbean. Energy Policy, 39(12), 7941-7949. https://doi.org/10.1016/j.enpol.2011.09.049
Al-mulali, U., Lee, J. Y. M., Mohammed, A. H., & Sheau-Ting, L. (2013). Examining the link between energy consumption, carbon dioxide emission, and economic growth in Latin America and the Caribbean. Renewable and Sustainable Energy Reviews, 26, 42-48. https://doi.org/10.1016/j.rser.2013.05.041
Amri, F. (2016). The relationship amongst energy consumption, foreign direct investment and output in developed and developing countries. Renewable and Sustainable Energy Reviews, 64, 694-702. https://doi.org/10.1016/j.rser.2016.06.065
Andrei, J.-V., Mieilă, M., Popescu, G., Nica, E., & Manole, C. (2016). The impact and determinants of environmental taxation on economic growth communities in Romania. Energies, 9(11), 902. https://doi.org/10.3390/en9110902
Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error component models. Journal of Econometrics, 68(1), 29-51. https://doi.org/10.1016/0304-4076(94)01642-D
Barelli, P., & Abreu Pessoâ, S. (2003). Inada conditions imply that production function must be asymptotically Cobb–Douglas. Economics Letters 81(3), 361-363. https://doi.org/10.1016/S0165-1765(03)00218-0
Bastola, U., & Sapkota, P. (2015). Relationships among energy consumption, pollution emission, and economic growth in Nepal. Energy, 80(1), 254-262. https://doi.org/10.1016/j.energy.2014.11.068
Brown, R. L., Durbin, J., & Evans, J. M. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society. Series B (Methodological), 149-192.
Christiaans, T. (2011). Semi-endogenous growth when population is decreasing. Economics Bulletin, 31(3), 2667-2673.
Clark, J. (2017). Environmental Protection in Transition: Economic, Legal and Socio-Political Perspectives on Poland. UK: Taylor & Francis. https://doi.org/10.4324/9781315256269
Constantini, V., & Martini, C. (2010). The causality between energy consumption and economic growth: a multi-sectoral analysis using non-stationary cointegrated data. Energy Economics, 32(3), 591-603. https://doi.org/10.1016/j.eneco.2009.09.013
Costanza, R., Hart, M., Talberth, J., & Posner, S. (2009). Beyond GDP: The need for new measures of progress (The Pardee papers No. 4). Boston University.
Eurostat (2018). The domestic material consumption (DMC). Retrieved 02 February 2018 from http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=t2020_rl110
Granger, C. W. (2003). Some aspects of causal relationships. Journal of Econometrics, 112(1), 69-69. https://doi.org/10.1016/S0304-4076(02)00148-3
Hansen, B. E. 1992. Tests for parameter instability in regressions with 1(1) processes. Journal of Business & Economic Statistics, 10(3), 321-335.
Huang, B. N., Hwang, M. J., & Yang, C. W. (2008). Causal relationship between energy consumption and GDP growth revisited: a dynamic panel data approach. Ecological Economics, 67(1), 41-54. https://doi.org/10.1016/j.ecolecon.2007.11.006
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53-74. https://doi.org/10.1016/S0304-4076(03)00092-7
International Labour Organization [ILO]. (2018). Retrieved 03 Martch 2018 from https://www.ilo.org/
Inada, K.-I. (1963). On a two-sector model of economic growth: comments and a generalization. Review of Economic Studies 30(2), 119-127. https://doi.org/10.2307/2295809
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2-3), 231-254. https://doi.org/10.1016/0165-1889(88)90041-3
Lan-yue, Z., Yao, L., Jing, Z., Bing, L., Ji-min, H., Shi-huai, D., ...& Yuan-wei, L. (2017). The relationships among energy consumption, economic output and energy intensity of countries at different stage of development. Renewable and Sustainable Energy Reviews, 74, 258-264. https://doi.org/10.1016/j.rser.2017.02.055
Mirza, F. M., & Kanwal, A. (2017). Energy consumption, carbon emissions and economic growth in Pakistan: dynamic causality analysis. Renewable and Sustainable Energy Reviews, 72, 1233-1240. https://doi.org/10.1016/j.rser.2016.10.081
Narayan, P. K., & Smyth, R. (2008). Energy consumption and real GDP in G7 countries: new evidence from panel cointegration with structural breaks. Energy Economics, 30(5), 2331-2341. https://doi.org/10.1016/j.eneco.2007.10.006
Narayan, S., & Doytch, N. (2017). An investigation of renewable and non-renewable energy consumption and economic growth nexus using industrial and residential energy consumption. Energy Economics, 68, 160-176. https://doi.org/10.1016/j.eneco.2017.09.005
National Institute of Statistics of Romania [NIS]. (2018). Retrieved 03 March 2018 from http://www.insse.ro
Panayotou, T. (2016). Economic growth and the environment. In N. Haenn, A. Harnish, R. Wilk (Eds.), The environment in anthropology (2nd ed., pp.140-148). New York: NYU Press.
Pang, R. Z., Deng, Z. Q., & Hu, J. L. (2015). Clean energy use and total-factor efficiencies: An international comparison. Renewable and Sustainable Energy Reviews, 52, 1158-1171. https://doi.org/10.1016/j.rser.2015.08.002
Payne, J. E. (2010). A survey of the electricity consumption-growth literature. Applied Energy, 87(3), 723-731. https://doi.org/10.1016/j.apenergy.2009.06.034
Phillips, P., & Hansen, B. E. (1990). Statistical inference in instrumental variables regression with I(1) processes. Review of Economic Studies, 57(1), 99-125. https://doi.org/10.2307/2297545
Popescu, G., Mieilă, M., Nica, E., & Andrei J.-V. (2018). The emergence of the effects and determinants of the energy paradigm changes on European Union economy. Renewable and Sustainable Energy Reviews, 81(Part1), 768-774. https://doi.org/10.1016/j.rser.2017.08.055
Sachs, W. (2015). Planet dialectics: Explorations in environment and development. UK, London: Zed Books Ltd.
Santos, J., Domingos, T., Sousa, T., & St Aubyn, M. (2018). Useful exergy is key in obtaining plausible aggregate production functions and recognizing the role of energy in economic growth: Portugal 1960–2009. Ecological Economics, 148, 103-120. https://doi.org/10.1016/j.ecolecon.2018.01.008
Shahbaz, M., Jam, F. A., Bibi, S., & Loganathan, N. (2016). Multivariate Granger causality between CO2 emissions, energy intensity and economic growth in Portugal: Evidence from cointegration and causality analysis. Technological and Economic Development of Economy, 22(1), 47-74. https://doi.org/10.3846/20294913.2014.989932
Soava, G., Mehedintu, A., Sterpu, M., & Raduteanu, M. (2018). Impact of renewable energy consumption on economic growth: evidence from European Union countries. Technological and Economic Development of Economy, 24(3), 914-932. https://doi.org/10.3846/tede.2018.1426
Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics 70(1), 65-94. https://doi.org/10.2307/1884513
Stern, D. I. (2000). A multivariate cointegration analysis of the role of energy in the US macroeconomy. Energy Economics, 22(2), 267-283. https://doi.org/10.1016/S0140-9883(99)00028-6
Stresing, R., Lindenberger, D., & Kümmel, R. (2008). Cointegration of output, capital, labor, and energy. The European Physical Journal B, 66(2), 279-287. https://doi.org/10.1140/epjb/e2008-00412-6
Sturm, J.-E., De Haan, J. (2006). Public capital spending in The Netherlands: developments and explanations. Applied Economics Letters 5(1), 5-10. https://doi.org/10.1080/758540117
Tiba, S., & Frikha, M. (2018). Income, trade openness and energy interactions: Evidence from simultaneous equation modeling. Energy, 147, 799-811. https://doi.org/10.1016/j.energy.2018.01.013
Tiba, S., Omri, A., & Frikha, M. (2016). The four-way linkages between renewable energy, environmental quality, trade and economic growth: A comparative analysis between high and middle-income countries. Energy Systems, 7(1), 103-144. https://doi.org/10.1007/s12667-015-0171-7
Wei, T. (2007). Impact of energy efficiency gains on output and energy use with Cobb–Douglas production function. Energy Policy, 35(4), 2023-2030. https://doi.org/10.1016/j.enpol.2006.08.009
Wood, J. C., & Woods, R. N. (1989). Sir John R. Hicks: Critical assessments. London: Rutledge.
World Bank Database. (2018a). Retrieved 03 March 2018 from https://data.worldbank.org/indicator/EG.USE.PCAP.KG.OE?locations=RO
World Bank Database. (2018b). Retrieved from https://data.worldbank.org/indicator/NY.GDP.PCAP.KN?locations=RO
Zaharia, M., Pătrașcu, A., Gogonea, M. R., Tănăsescu, A., & Popescu, C. (2017). A cluster design on the influence of energy taxation in shaping the new EU-28 economic paradigm. Energies, 10(2), 257. https://doi.org/10.3390/en10020257
Zhixin, Z., & Xin, R. (2011). Causal relationships between energy consumption and economic growth. Energy Procedia, 5, 2065-2071. https://doi.org/10.1016/j.egypro.2011.03.356
Zilio, M., & Recalde, M. (2011). GDP and environment pressure: the role of energy in Latin America and the Caribbean. Energy Policy, 39(12), 7941-7949. https://doi.org/10.1016/j.enpol.2011.09.049