Modeling the non-linear relationship between financial development and energy consumption: statistical experience
Muhammad Awais Baloch1, Danish2, Fanchen Meng3
1School of Economics and Management, Baoji University of Arts And Sciences, Baoji, 721013, China.
Environmental Science and Pollution Research International
|February 5, 2019
Summary
Financial development and economic growth show an inverted U-shape relationship with energy consumption. A feedback loop exists between financial development and energy use, impacting energy efficiency policies.
Area of Science:
- Environmental Economics
- Financial Economics
- Energy Economics
Background:
- The relationship between financial development and energy consumption is a key area of research.
- Existing literature presents ongoing debate regarding the non-linear dynamics between financial development and energy demand.
Purpose of the Study:
- To investigate the non-linear relationship between financial development, economic growth, and energy consumption.
- To analyze these dynamics specifically within OECD countries.
Main Methods:
- Employed Driscoll-Kraay standard errors panel regression model.
- Data spanned the period from 1980 to 2016 for OECD countries.
Main Results:
- Identified an inverted U-shape relationship between financial development and energy consumption.
- Observed an inverted U-shape relationship between economic growth and energy consumption.
- Confirmed a feedback hypothesis between financial development and energy use, and bidirectional causality between income and energy use.
Conclusions:
- The study confirms complex, non-linear interactions between financial development, economic growth, and energy consumption.
- Findings offer crucial insights for policymakers aiming to enhance energy efficiency and sustainable development strategies.
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