Revisited the nexus between renewable energy consumption and economic growth: a smooth transition regression approach

The global demand for energy resources is increasing significantly. Since several decades ago, the gross domestic product (GDP) has risen with increased energy consumption. Fossil fuel consumption that emits greenhouse gases causes several environmental issues, such as climate change and air pollution, besides affecting agriculture and livestock. Hence, the awareness to promote environmental quality through green energy and the transition to renewable energy consumption (REC) is becoming more prevalent worldwide. This study applies a nonlinear technique, specifically the smooth transition regression (STR) method, to explore the two-way REC-GDP nexus using the world's quarterly data from 1970 to 2021. The logistic and exponential functions of the STR are compared to capture the smooth transition of the GDP and REC growth rates across regimes. The findings revealed nonlinearities. The REC and GDP growths are reactive to their historical movements. Therefore, proactive actions are necessary to mitigate the adverse effects of historical growth.