Asymmetric impacts of renewable energy consumption and economic complexity on economic growth in Saudi Arabia: evidence from the NARDL model.

This paper examines the asymmetric impacts of both renewable energy consumption and economic complexity on Saudi Arabia's economic growth in nonlinear autoregressive distributed lag (NARDL) frameworks. We firstly adopt the methodology of both standard NARDL and multiple threshold NARDL (MT-NARDL) models using quarterly data over the period 2000Q1–2015Q4. Then, we test the direction of the causal relationships between the underlying variables using both symmetric and asymmetric Granger causality tests. Our results from the standard NARDL model indicate that the long-term impact of a negative shock in renewable energy consumption on economic growth is significantly negative, while the short-term impact of either positive or negative shocks has a significant positive effect. Moreover, both positive and negative shocks in economic complexity have significant negative effects on economic growth in the long term, while economic growth is only affected by the negative change in economic complexity in the short term. Our estimates based on the best MT-NARDL model indicate that, in the long run, the effect of extremely large changes in renewable energy consumption is significantly different from the effect of small changes in renewable energy consumption on Saudi Arabia's economic growth. However, the effect of extremely large changes in economic complexity does not significantly differ from the effect of small changes in economic complexity on economic growth in the long run. Alternatively, in the short run, the effects of extremely large changes in both renewable energy consumption and economic complexity are not significantly different from the effects of small changes in those variables on economic growth. Finally, the symmetric/asymmetric causality nexus between positive/negative shocks to either renewable energy consumption or economic complexity and positive/negative shocks to economic growth is found to be neutral. The findings of this study provide deeper insights into the relationship between renewable energy consumption, economic complexity, and economic growth in Saudi Arabia and can be used for recommending different policies in the long run and short run. [ABSTRACT FROM AUTHOR]