On the nexus of financial development, economic growth, and energy consumption in China: New perspective from a GMM panel VAR approach

Ouyang, Yaofu; Li, Peng

doi:10.1016/j.eneco.2018.02.015

Cited by 277 publications

(121 citation statements)

References 79 publications

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“…Then, the results of this paper show that there is a negative relationship between energy consumption and financial development in the case of NAFTA countries. In relation to other studies, a negative relationship between these variables is also found in Farhani and Solarin [16] for the United States; Ouyang and Li [22] in the case of China. A positive relationship is found in Coban and Topcu [15] for the countries of the European Union (EU) when only old members are included; Komal and Abbas [10] for Pakistan; Mahalik et al [18] for Saudi Arabia; Sadorsky [3] when stock market variables are used in 22 emerging countries; Al-Mulali and Lee [23] for the Gulf Cooperation Council countries; Sadorsky [4] for a sample of 9 Central and Eastern European frontier economies.…”

Section: Variablesupporting

confidence: 72%

“…The results show that in the short and long terms there is a positive relationship of financial development, economic growth, exports and imports on electricity consumption in Japan. Ouyang and Li [22] study the relationship between financial development, energy consumption and economic growth in China (1996Q1-2015Q1), considering three regions: eastern, central, and western. The results in this research indicate that financial development has a significant and negative impact on economic growth, while energy consumption contributes significantly to economic growth.…”

Section: Review Of the Literaturementioning

confidence: 99%

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Energy Consumption and Financial Development in NAFTA Countries, 1971–2015

Gómez

Chávez

2019

Applied Sciences

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To satisfy human needs and desires, it is necessary to produce goods and services that require the use of some production factors, such as labor, capital, and energy, among others. Nowadays, energy is a key production factor for economic activity in all countries. The main objective of this paper is to analyze the relationship between energy, economic growth, urbanization, and financial development in the country-members of the North American Free Trade Agreement (NAFTA) during the period of 1971-2015. Panel data Econometric methods are applied in this research, namely cross-section dependence (Pesaran test), unit root (Cross-sectional Augmented Dickey Fuller and Cross-sectional Im, Pesaran, and Shin tests), cointegration (Kao and Fisher-Johansen tests), and heterogeneous causality (Hurlin and Dumitrescu test). The results achieved in this research demonstrate that the variables of this model are characterized by a cross-section dependence, and they are integrated in order one. An equilibrium or long-term relationship between them exists. By means of the Fully Modified OLS and Dynamic OLS estimators it this demonstrated that there is a positive relationship between GDP and EC, while there is a negative relationship between FD, CPI, URB, and TO and EC. The economic policy recommendations drawn from this investigation are that financial development promotion, urbanization, and trade openness may contribute to reducing energy consumption in these countries. Appl. Sci. 2019, 9, 302 2 of 11 transparency among borrowers and lenders, fosters greater flows of financial capital and investment, and facilitates access to more efficient energy products, among other things, which can affect the demand for energy by increasing consumption and business investments [3,4]. Financial development affects the demand for energy through the following: (a) it allows consumers to access easier and cheaper loans of money to buy durable goods, such as cars, houses, refrigerators, washing machines, etc., which are large energy consumers that can affect the total energy demand of a country; (b) it allows businesses to access easier and less expensive financial capital, which can help create a new business or expand existing ones, such as buying or building more plants, employing more workers, and buying machinery and equipment [3,4].The economy, energy, and the environment are three important elements for the development of nations because the use of energy is vital to the world economy in the present and in the future. However, an increase in energy use generates increases in carbon dioxide (CO 2 ) emissions, which cause environmental problems [5]. It would be expected that greater economic growth and economic development are related to higher levels of electricity and energy consumption in general; moreover, a greater amount of CO 2 emissions and resources from financial markets are required to fund economic development [6]. However, there are also authors who argue that financial development facilitates the reduction of energy consump...

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Section: Variablesupporting

confidence: 72%

Section: Review Of the Literaturementioning

confidence: 99%

Energy Consumption and Financial Development in NAFTA Countries, 1971–2015

Gómez

Chávez

2019

Applied Sciences

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“…A few studies also attempt to analyze the relationship using panel datasets while studying multiple countries [29,30]. However, each country has its distinct financial background, institutions, policies and environments, and as such, the broad comparative analyses conducted at the aggregate level are hardly able to capture such differences [31]. Similarly, countries contrast in terms of their financial structure, size of financial institutions and instruments, financial intermediation efficiency, degree of concentration of financial institutions, the volume of financial transactions and the efficacy of the financial regulatory framework [31,32].…”

mentioning

confidence: 99%

“…Consequently, the panel data-based studies also fail to determine the relationship conclusively. Moreover, in-depth country-specific study, particularly in terms of heterogeneity across areas, lends beneficial reference for other emerging economies [31]. Hence, our study aims to investigate the energy-finance nexus in relation to economic growth for a sample of countries separately in order…”

mentioning

confidence: 99%

Energy–Finance–Growth Nexus in ASEAN-5 Countries: An ARDL Bounds Test Approach

et al. 2019

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This study examines the relationship between energy consumption, financial development and economic growth for ASEAN-5 countries, namely Malaysia, Indonesia, the Philippines, Singapore and Thailand, over the period from 1980 to 2017. Finance-growth and energy-growth relationships have been well researched; however, the energy-finance-growth nexus is an equally important but less explored area. Our Auto Regressive Distributed Lags (ARDL) bounds test for cointegration results suggests that the variables tend to move together in the long run for all countries, apart from Indonesia. Our study also considers the effect of a structural break due to financial crisis and confirms that the break does not affect the long-term relationship among the variables; in other words, the financial crisis does not affect the energy-finance-growth nexus. Hence, considering the consistency of energy consumption, the importance of the energy sector must not be undermined, and appropriate energy policies are instrumental in maintaining a well-managed financial sector for sustainable economic growth.Sustainability 2020, 12, 5 2 of 16 demand [15], while the importance of financial variables in investigatng the energy-growth nexus is well documented by [16]. Financial development indicates the actual level of financial resources available for production and channels these funds through banks and stock markets [17]; thus, this promotes economic growth by boosting investment via transparent transactions for productive ventures [15]. A higher level of economic development through raising the capacity of the production sector and attracting foreign investment requires a stable power supply, which necessitates support by the financial sector through channeling resources to the energy sector [18]. A well-developed financial market makes financial resources available to high-return projects; at the same time, this implies better accounting and reporting standards, which increases investors' confidence [19], and attracts Foreign Direct Investment(FDI) [7]; which in turnaffects energy consumption. Similarly, financial development increases energy consumption by enhancing liquidity through the allocation of assets to appropriate ventures [15]. Hence, financial development affects the growth of an economy, which may influence energy consumption [20], and consequently, can act as the missing link in the energy-growth nexus [5]. With the growth in the economy, more productive inputs are needed which are supported by activities such as capital accumulation and energy expenditure where the role of finance is undisputable [21].However, to date, the nature of the relationship remains inconclusive from the relatively small amount of prevailing literature. Some researchers have found a negative relationship between energy consumption and financial development [22], while others detect a positive relationship [13,23]. Similarly, the results of the cointegration and causality analysis-based studies are also inconclusive. Several studies reported bidirectional ...

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“…They found urbanization and upgrading of industrial structure have a larger contribution rate to the deviation in energy and carbon intensity. Ouyang and Li studied the endogenous relationships among financial development, energy consumption, and economic growth in China over the period 1996Q1‐2015Q4. Lei et al developed an indicator to assess low‐carbon economy in China and further employed a panel vector autoregression approach to find out the role of economic variables in determining the low‐carbon economic growth.…”

Section: Literaturementioning

confidence: 99%

China's provincial energy‐related carbon emissions‐economy nexus: A two‐stage framework based on decoupling analysis and panel vector autoregression

Pan

Liu

Tsai

et al. 2019

Energy Science & Engineering

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China is transforming the growth model and speeding up industrial structural improvement and upgrading now and in the coming years, which means the slowdown of economic growth and more serious environmental costs in economic and social development would be the “New Normal.” As the world's largest energy consumer and carbon‐emitting country, China's emissions reduction commitments are crucial to global greenhouse gas emissions mitigation, so there is a profusion of research focused on China's economy‐environment nexus. Among which, the dynamic relationship of carbon emission and economic growth and its evolution combined the national, regional, provincial data have not been discussed thoroughly. This paper analyses the elasticity of economic performance of carbon emissions based on 30 Chinese provincial data from 2000 to 2016; furthermore, a panel vector autoregressive model is constructed to discuss the interactions of variables within environmental economic system. It is concluded that China is experiencing a turning point from weak decoupling to strong decoupling in recent years, and its economic performance of carbon emissions has been gradually improved with larger disparities among provinces though. Regression result confirms the role of the energy mix on carbon emissions, and it also indicates that the impact of most factors influencing that have been discussed in previous studies may not be direct, prominent, and for long term.

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On the nexus of financial development, economic growth, and energy consumption in China: New perspective from a GMM panel VAR approach

Cited by 277 publications

References 79 publications

Energy Consumption and Financial Development in NAFTA Countries, 1971–2015

Energy Consumption and Financial Development in NAFTA Countries, 1971–2015

Energy–Finance–Growth Nexus in ASEAN-5 Countries: An ARDL Bounds Test Approach

China's provincial energy‐related carbon emissions‐economy nexus: A two‐stage framework based on decoupling analysis and panel vector autoregression

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