Exploring the relationship between economic growth, energy consumption, urbanization, trade, and CO2 emissions: a PMG-ARDL panel data analysis on regional classification along 81 BRI economies

The vision of every country or sub-regions is to achieve sustainable economic growth. The inability of individual countries to have a sole sustainable initiative has resulted in the establishment of economic cooperation such as the Belt and Road Initiative (BRI), which renders interaction among 138 relevant countries to increase economic development. This study delves into the determinants of economic growth along the BRI economic corridors, taking into consideration regional classification of the relevant countries. The analytical procedure applied indicated the presence of heterogeneity in the slope coefficient and cross-sectional dependencies across the various panels. Applying the Westerlund bootstrap co-integration test, it was deducted that the employed variables have a long-run equilibrium association. The results from the pooled mean group (PMG) revealed that the contribution weight (order of importance) of the explanatory variables to economic growth varies across the regional panel clusters. Finally, the causality results unveil that a bidirectional causation affiliation exists between energy consumption and economic growth in all panels except Southeast and South Asia which experience one-way directional effects from energy usage to economic growth. Trade and economic growth unveiled a bidirectional causal affiliation in all panel groups with exception of the Middle East and North Africa, where a one-way directional affiliation from trade to economic growth was felt. These results obtained indicate that energy consumption, urbanization, trade, and CO₂ emissions are determinants of economic growth along the BRI route. Based on the outcome, the suggested policy implications include the following: (a) The government across each region could incorporate tax and other incentives to encourage entrepreneurs and citizens to produce equipment that reduces carbon intensity and is ecologically friendly. (b) The necessity for a paradigm shift away from fossil fuels and towards renewable energy sources should be advocated among the countries involved.