Modeling the non-linear relationship between financial development and energy consumption: statistical experience from OECD countries
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The linkage between financial development and energy consumption is widely investigated in the literature. However, the non-linear relationship between financial development and energy demand is still under debate. Therefore, this study aims to examine the non-linear relationship between financial development, economic growth, and energy consumption in OECD countries. The study uses the Driscoll–Kraay standard errors panel regression model for spanning from 1980 to 2016. The empirical findings indicate that an inverted U-shape relationship exists between financial development and energy consumption as well as between economic growth and energy consumption. Moreover, the feedback hypothesis is found between financial development and energy use. Additionally, income and energy use granger cause each other. The innovative findings contribute to extant literature, which is of special interest to the country’s policymakers regarding energy efficiency.
KeywordsFinancial development Energy consumption Non-linear relationship OECD countries
The authors want to say thanks to the Editor, Dr. Philippe Garrigues, as well as four referees for giving valuable suggestions, which substantially improved this study. Muhammad Awais Baloch and Danish contributed equally to this study and shared the first authorship. The usual disclaimer applies.
This study is supported by Humanities and Social Science Fund of Ministry of Education of China (Reference No. 17YJAC30072).
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