Effects of financial developments and income on energy consumption

By Shu-Chen Chang. 2015

380 citations recorded by the source corpus.

Extending Sadorsky (2010), this paper focuses on nonlinear effects of financial development and income on energy consumption. Utilizing five alternative measures of financial development, it employs a panel threshold regression approach to reexamine the effect of financial development and income on energy consumption. The analysis relies on a sample of 53 countries for the period 1999–2008, showing a single-threshold effect on energy consumption when private credit, domestic credit, value of traded stocks, and stock market turnover are used as financial development indicators. It implies that the sample can be split into two regimes: high income, and non-high income. Energy consumption increases with income in emerging market and developing economies, while in advanced economies energy consumption increases with income beyond a point at which the economy achieves a threshold level of income. In addition, in the non–high income regime, energy consumption increases with financial development when both private and domestic credit are used as financial development indicators. However, when the value of traded stocks and stock market turnover are used as financial development indicators, it slightly declines with financial development in advanced economies, especially in high-income countries, but increases in the higher income countries of emerging market and developing economies.

Subfields: Economics and Econometrics, Pollution, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/80327b72f0c59a1be333b886abb91503819ac8bf

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Citations in the corpus

Financing Renewable Energy Projects in Major Emerging Market Economies: Evidence in the Perspective of Sustainable Economic Development (2017, background): “Paramati and Gupta (2011) establish significant long-run association between stock market performance and economic growth in India.”
On the nexus of financial development, economic growth, and energy consumption in China: New perspective from a GMM panel VAR approach (2018, background): “…flows, and advanced technologies.3 Thereafter, in the spirit of Karanfil (2009) and Sadorsky (2010), there emerge a few studies that add financial development into the energy-growth nexus (e.g., Chang, 2015; Kakar, 2016; Le, 2016; Shahbaz et al., 2013; Shahbaz and Lean, 2012; Shahbaz et al., 2017).”