RENEWABLE ENERGY AS A DRIVER FOR ECONOMIC GROWTH: THE CASE OF WESTERN BALKAN COUNTRIES

Abstract

To examine the effect of consumption in renewable energy on the economy in Western Balkans, this paper covers period from 2010 to 2024. After the shift to clean energy becomes a state-level or regional goal, it remains vitally necessary to recognize whether the boost of renewable energy consumption is relevant to the growth of the economy over time. Furthermore, a panel dataset containing primary observations about the participating countries was collected through annual data obtained from the World Bank and the respective countries’ Statistical Office. By employing the VECM econometric model, panel data covering five countries in the region and each variable below are selected: real gross domestic product (RGDP), share of renewable energy consumption in gross energy consumption (ERGC), labor force participation rate (FLPR), foreign direct investment (FDI) and net inflow, gross capital formation (GCF), and inflation. The final finding is that consumption of renewable energy not only has a strong positive impact on economic growth, but also a large share of the growth derives from renewables later in the period. The ultimate conclusion could prompt politicians to deploy more green investments for decreasing pollution and pushing sustainable growth. And our results furnish one type of support to existing literatures.