Unveiling the energy-growth nexus: a compelling journey through four key hypotheses

Abstract

This review offers a critical and comprehensive reassessment of the energy-growth nexus (EGN) literature, shedding new light on the intricate and evolving relationship between energy consumption (EC) and economic growth (EG). While energy is widely recognized as a key driver of sustainable development, emissions mitigation, and social advancement, findings on its connection with EG remain inconclusive. Building on the foundational work of Kraft and Kraft (1978), this study distinguishes itself by systematically evaluating the heterogeneity in variable selection, data frequency, proxy usage, and econometric methodologies employed in existing literature. In doing so, it highlights the conceptual and empirical fragmentation that has led to diverging interpretations of the growth, conservation, feedback, neutrality, and resource-curse hypotheses. A novel contribution of this review lies in its focus on the non-linear and context-specific dynamics of the EGN, shaped by economic structures, financial development, technological advancement, and institutional quality. By synthesizing the fragmented findings and critically assessing methodological shortcomings, this paper proposes a forward-looking agenda that encourages the adoption of innovative models and context-sensitive proxies. From a policy perspective, increasing renewable energy consumption is recommended to reduce environmental degradation without compromising growth.