Renewable Energy Consumption and Foreign Direct Investment : Bangladesh's Case

Abstract: FDI investment is a vital factor for the developing countries economic growth. Apart from working as a catalyst of increasing total output level, FDI is a source of clean energy, technology transfer and energy efficiency. There have been very limited studies on the impact of FDI on renewable energy consumption in the context of Bangladesh. In fact, to my best knowledge there hasn’t been any studies on Bangladesh regarding this relationship with recent data available. Therefore, the aim of this paper is to reveal the relationship between FDI and renewable energy consumption in Bangladesh with annual Data spanning from 1980 to 2016. Johansen’s cointegration test showed that variables are cointegrated in the long run. Through Vector Error Correction Model (VECM), the paper shows there is short run and long run causality between FDI and Renewable Energy Consumption and the causality is negative. Granger causality test reveals that the direction of causality is running from FDI to Renewable Energy Consumption. Policies regarding attracting more sectoral FDI should be considered to improve investment scenario in Renewable energy sector.