A Dynamic Panel Data Analysis for Relationship between Energy Consumption, Financial Development and Economic Growth

Abstract

The purpose of this work is to investigate the cointegration and Granger causal relationship between economic growth and total energy consumption as well as the relationship between economic growth and financial development in the MENA region by using a panel data analysis the period over 2000-2018. Different from limited existing provincial studies on the MENA region, an advanced panel econometric methodologies such as dynamic Panel data techniques consider the question of the energy use-economic growth-financial development nexus. Our results suggest that energy consumption exerts a positive and significant impact on economic growth. Furthermore a positive relationship between financial development and economic growth was detected. Thereby it is important to examine the causal effects of both the total energy use and the financial system before local governments make specific energy and economic policies.

Effect of Financial Development, Foreign Direct Investment, Globalization, and Urbanization on Energy Consumption: Empirical Evidence From Belt and Road Initiative Partner Countries

“…Those investments lead to economic activities that in turn raise energy demand. The results are consistent with Sadraoui et al (2019), who found that financial development is positively and significantly associated with economic growth in the Middle East and North Africa region. The results are also in line with Mukhtarov et al (2020), who found that FD showed a significant, positive impact on Azerbaijan's energy consumption per capita and increase in demand.…”

“…Moreover, the two-step sys-GMM is appropriate for controlling the measurement errors in the analysis. In light of our first hypothesis, FD significantly and positively contributed to ECPC at a significance level of 1%, which is supported by Sadraoui et al (2019) and Mukhtarov et al (2020) leading to the acceptance of the alternate hypothesis. Apart from that, foreign direct investment also contributed positively to energy consumption, but insignificantly; this is consistent with Mohamed and Mamat (2016) and Salim et al (2017), which led to the rejection of our hypothesis as FDI is insignificant.…”

Financial Development and Energy Consumption in Sub-Saharan Africa: Evidence From Panel Vector Error Correction Model

“…Under the empirical front, Sadraoui et al (2019) utilized a dynamic panel data model, cointegration, and Granger causality approaches over the time period covering 2000 and 2018 in examining the interconnectivity among financial development, energy consumption, and economic growth in the Middle East and North Africa (MENA) region. The result from the panel analysis showed that financial development has a positive and significant effect on economic growth, while financial development Granger causes energy consumption in the MENA region.…”

“…Essentially, the link at which financial development influences energy consumption or use has generated many debates in the literature as many studies have inundated with arguments on establishing the nexus between financial development and energy consumption. For instance, while studies by Sadraoui et al (2019), Roubaud and Shahbaz (2018), and Destek (2018) found a positive causal relationship between financial development, other studies like Ali et al (2015), Mahalik and Mallick (2014), and Zeren and Koc (2014) found a negative causality between financial development and energy consumption due to negative shocks in energy prices.…”

Inequalities by energy sources: An assessment of environmental quality

“…Energy is one of the most important inputs for economic growth and development [1]. It is the indispensable need of each sector of the economy, such as household, industry, and agriculture [2,3]. On the contrary, a decrease in energy consumption can affect the development process directly or indirectly [4].…”