Renewable energy consumption and economic growth: New evidence from Ghana

Whenever there is a question of environmental quality and economic prosperity, renewable energy consumption leads the debate. Ghana is a country blessed with a lot of renewable energy resources. However, Ghana depends on non-renewable energy to fuel its economy. This study investigates the direct impact and indirect impact of renewable energy on economic growth using both the Granger causality and the mediation model in its analysis based on data from 1990 to 2015. The variables used for this research are renewable energy, the gross domestic product, foreign direct investment, gross capital formation, and trade. The outcome shows a feedback effect among economic growth and renewable energy consumption, but renewable energy consumption does not have a significant indirect impact on economic growth. Renewable energy has a significant total impact on economic growth. Therefore, the increase in renewable energy consumption has a total positive effect on economic growth. The empirical results of our study suggest that, the use of renewable energy should be encouraged to promote economic growth.