Revisiting Trade, Energy and Growth Nexus in Portugal: An Empirical Evidence from ARDL Approach

Abstract

This research is aimed at revisiting the trade, energy, and growth nexus for Portugal. This nexus will be tested by considering the cointegration test developed by Pesaran et al. (2001). An annual data series from 1986-2022 will be used for analysis. The empirical results suggest that trade openness significantly increases economic activities in Portugal. The results further show that capital formation, energy consumption, and consumer prices also elevate domestic production. Among all these factors, trade openness strongly impacts economic growth. It is further stated that these findings are robust based on all the applied diagnostic tests. Based on these findings, investments should be enhanced to boost trade, capital, and energy so Portugal can enjoy increased economic activities. Besides this, domestic prices may be boosted in such a way that it may not harm the buying power of the buyers but may help improve domestic production and economic growth.