The Relationship Between Trade Freedom, Energy Consumption and Economic Growth in Developing Countries

Document Type : Research Paper

Authors

1 Associate Professor of Economics, Faculty of Economics, Allameh Tabatabaei University, Tehran, Iran

2 Department of Energy Economics, Faculty of Economics, Allameh Tabatabaei University, Tehran, Iran

Abstract

In recent years, trade freedom has been considered as a key factor in economic development in developing countries, but its interaction with energy consumption and economic growth remains controversial. International trade facilitates access to advanced technologies but at the same time increases production activities, which in turn leads to increased energy consumption and ultimately environmental challenges. In this study, using panel data from 20 developing countries over the period 2000-2024 and the DOLS estimation method for long-run relationships and Granger Panel and Toda-Yamamoto causality tests, the causal relationship between trade freedom, energy consumption and economic growth in selected developing countries was examined. The results showed that energy consumption and trade freedom have a positive and significant effect on economic growth, while the effect of economic growth on energy consumption is negative and energy prices on energy consumption and trade freedom are positive. Causality tests confirm the bidirectional relationship between trade freedom and economic growth (Granger) and the unidirectional relationship from trade freedom to economic growth (Toda-Yamamoto at the 90% level), as well as the unidirectional relationship from energy consumption to economic growth; the bidirectional relationship between trade freedom and energy consumption was confirmed only at the Granger level. The findings suggest that implementing coordinated trade and energy policies is of great importance to achieve sustainable growth. These results also provide a good guide for policymakers in developing countries to maintain a balance between free trade and environmental goals.

Keywords

Journal of Environmental and Natural Resource Economics
Volume 5, Issue 12
January 2026

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History

  • Receive Date: 05 January 2026
  • Revise Date: 13 January 2026
  • Accept Date: 13 January 2026

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