Energy consumption threshold in the context of structural breaks: evidence from Tunisia industrial production using the logistic smooth transition regression approach

Abstract

Abstract This paper aims to empirically analyze the relationship between energy consumption and economic growth measured by the industrial production index in Tunisia from January 1986 to December 2021. Using the Non-linear Logistic Smooth Transition Model, the results show a non-linear impact. In fact, in the first regime, where optimal energy consumption growth is lower than the threshold of 0.027, energy consumption has a significant and positive impact on economic growth evaluated at 0.715. However, in the second regime, we found a substantial and negative elasticity equal to −0.028, which shows an unfavorable effect on the growth of the industrial production index in Tunisia, especially at the threshold level higher than 0.027. Consequently, the relationship between Tunisia’s energy consumption and growth could be more stable. According to the study, energy consumption and economic growth in Tunisia have a non-linear relationship, which raises the possibility that excessive energy use may eventually harm economic performance or result in diminishing benefits. This emphasizes controlling and balancing energy consumption levels to achieve the best possible economic growth.

Keywords

• Energy consumption
• Industrial production
• Non-linear logistic smooth transition model
• Developing countries