The Financial Development-Renewable Energy Consumption Nexus in the Case of Azerbaijan

Abstract

This article analyzed the relationship between financial development, renewable energy consumption, economic growth, and energy prices in Azerbaijan by employing time series data for the time span of 1993–2015. The autoregressive distributed lagged (ARDL) technique was applied in empirical estimations, because it performs better than all the alternative techniques in small samples, which was the case here in this article. The results of estimation found that there is a positive and statistically significant influence of financial development and economic growth on renewable energy consumption, whereas the prices of energy proxied by CPI have an adverse impact on renewable energy consumption in Azerbaijan. Also, estimation results demonstrated that a 1% rise in financial development, proxied by domestic credit as a percentage of GDP, and economic growth increase renewable energy consumption by 0.16% and 0.60%, respectively. The different financial development impacts on renewable energy consumption and related policy implications were also introduced.

Nexus between Economic Policy Uncertainty and Renewable Energy Consumption in BRIC Nations: The Mediating Role of Foreign Direct Investment and Financial Development

“…The impact of financial development on REC, study documents positive association in Brazil (a coefficient of 0.134), in Russia (a coefficient of 0.049), and in India (a coefficient of 0.071) and in China (a coefficient of 0.049), indicating the financial expansion enhances the green energy consumption through investing in the energy sector, especially for the production of renewable energy. Study findings are in line with Eren, Taspinar, and Gokmenoglu [78], Naqvi, et al [110], Mukhtarov, Humbatova, Hajiyev, and Aliyev [79]. More specifically, a 10% growth in financial development can result in Brazil's renewable energy consumption by 1.34%, in Russia by 0.49%, in India by 0.71%, and in China by 0.49%, respectively.…”

“…It refers to financial development proxies' respective elasticities on renewable energy consumption, all the proxies except stock market development have exposed statistically insignificant linkage with renewable energy consumption in EU nations. Mukhtarov, et al [79] gauged the effects of financial sector development on renewable energy consumption in Azerbaijan from 1993 to 2015 by implementing autoregressive distributed lagged (ARDL) tests. The study findings reveal positive statistically significant effects running from financial sector development and economic growth to renewable energy consumption in the long-run.…”

“…A country decides to expand its financial institution operations, including banking, foreign direct investment, and the stock market [82]. Financial development occurs when financial institutions provide high-yield loans at low financing costs to their clients, improves transparency between lenders and borrowers, and lowers financial risk [79]. Financial development promotes financial activity, raises energy consumption, and the relationship between the two impacts of energy and finance policy [83].…”

The impact of financial development and geopolitical risk on renewable energy consumption: evidence from emerging markets

“…These outcomes of FD have good effects on cost of clean energy and respectably highlights the importance of FD in consumption of renewable energy (Anton and Nucu 2020 ). Financial sector developments enhance usage of renewable energy (Khan et al 2020 ; Mukhtarov et al 2020 ; Qamruzzaman and Jianguo 2020 ). According to Pata ( 2018 ), FD positively affects economic and economic growth may increase environmental pollution.…”

The Impact of Environmental Policy Stringency on Renewable Energy Production in the Visegrad Group Countries

“…The belief that higher GDP is correlated with greater use of renewable energy is based on the assumption that higher income means more resources available to implement and promote costly sustainable environmental alternatives, including greater deployment of renewables [56]. The correctness of the view about the positive impact of GDP on renewable energy consumption (supply) was confirmed by many scholars who researched GDP per capita [57][58][59][60][61][62][63][64] or GDP in absolute terms [65]. In addition, Przychodzen and Przychodzen [66], using data from 27 transition countries over the years 1990-2014 have found that higher GDP growth stimulate renewable energy generation.…”