Asymmetric effects of financial development, innovation, FDI, and economic growth on renewable energy consumption in South Africa: Evidence from a NARDL approach (1990–2025)

This study examines the relationships among financial development (FD), innovation (INN), foreign direct investment (FDI), economic growth (EG), and renewable energy (RE) consumption in the Republic of South Africa over the period 1990–2025. The purpose is to identify key macroeconomic drivers of RE transition while accounting for potential nonlinear and asymmetric dynamics. Using annual time-series data from internationally recognized sources, the analysis employs the Nonlinear Autoregressive Distributed Lag (NARDL) model, complemented by robustness checks using ARDL, FMOLS, and DOLS estimators. The results confirm the existence of a long-run cointegrating relationship among the variables. FD and EG are found to have positive and statistically significant effects on RE consumption, both in the long and short run. In contrast, INN and FDI exhibit positive but statistically insignificant coefficients, indicating that their effects are not empirically robust within the sample period. The nonlinear analysis further reveals asymmetric dynamics: negative shocks in FD and EG exert stronger adverse effects than positive shocks generate benefits. Diagnostic and robustness tests support the model's validity and reliability, though caution is warranted given potential issues with residual autocorrelation and the use of aggregate proxies for FDI and INN. These limitations may mask underlying sectoral heterogeneity, particularly between green and non-green investment and INN activities. The findings suggest that strengthening financial systems and maintaining stable EG are critical for advancing RE adoption in South Africa. However, the limited role of aggregate FDI and INN highlights the need for more targeted policies that promote green investment and energy-specific technological development. In general, the study provides incremental, policy-relevant evidence by clarifying the asymmetric, statistically robust determinants of RE transition in an emerging economy context.