The Positive Influences of Renewable Energy Consumption on Financial Development and Economic Growth

Abstract

This study aims to evaluate the positive impacts of renewable energy usage on the economic growth and financial development. For this purpose, an evaluation has been performed with VAR analysis. In the analysis process, annual data for the period between 1990 and 2015 is used. The findings show that renewable energy usage and financial development do not have a powerful influence on the economic growth. However, it is identified that renewable energy usage has a positive impact on the financial development. Hence, it is strongly recommended that renewable energy usage should be encouraged by policy makers in the country. Nonetheless, to understand the main indicators of economic growth, many different factors should be taken into consideration. It is seen that owing to the use of environmentally friendly energy, the size of the financial sector increases. It is obvious that environment-friendly energy usage attracts the attention of the financial investors. In this context, it would be appropriate to give some incentives to renewable energy investors. Within this framework, issues such as tax reduction, location support, and low interest loan opportunities will make renewable energy investments more reasonable.

Financial development, ecological transition, and economic growth in Sub-Saharan African countries: the performing role of the quality of institutions and human capital

“…Inflation worsens the financial system as predicted by most theories. These findings are consistent with Lahiani et al (2021), Lu et al (2021), and Usman et al (2021) in America and Zhe et al (2021) in Europe. Completing the analysis of previous models, we found evidence of a bilateral causality between economic growth and financial development in Sub-Saharan Africa.…”

“…Among the kinds of clean technologies, renewable energies (hydro, wind, solar, biomass, geothermal, ocean) constitute an inexhaustible energy resource, but to achieve the transformation, large-scale investments are crucial, therefore creating the theoretical investment-ecology-growth loop. Four hypotheses have been established: (i) the growth hypothesis stating that energy consumption through the production process improves economic growth (Odugbesan and Rjoub 2020; Zhe et al 2021;Usman et al 2021), (ii) the conservation hypothesis reporting that economic growth leads to an increase or decrease in energy demand (Gaies et al 2019;Shahbaz et al 2021), (iii) the feedback hypothesis formulating that there is a bidirectional causality between growth and energy consumption (Aimer 2020), (iv) and the neutrality hypothesis saying that there is no link (Maji et al 2019).…”

“…Studying renewable energy, economic growth, and financial development in Turkey over the period 1990-2015 with VAR analysis, Zhe et al (2021) identified that renewable energy has a positive impact on financial development, measured by stock traded and bank loans given as a percentage of GDP. Also, Nkalu et al (2020) analyzed financial development (proxied by domestic credit to the private sector) and energy consumption in Sub-Saharan Africa.…”

“…Institutional quality and real income per capita have been documented as key determinants of banking sector development, whereas trade openness, investment, and inflation tend to promote stock market development (Razmi et al 2020;Zhe et al 2021;Lahiani et al 2021). Macroeconomic factors such as capital, government expenditure, and human capital are a precondition for infrastructure development, promoting financial development (Nkalu et al 2020).…”

Identifying Significant Points of Energy Culture for Developing Sustainable Energy Investments

“…Therefore, the use of renewable energy is accepted as environmentally friendly energy (Murshed, 2021). Another energy culture function that can be considered to ensure continuity in energy investments is the awareness level of the people (Zhe et al, 2021). If the people living in a country are more conscious about the environment, it will be more possible to ensure sustainability in energy investments (Levenda et al, 2021).…”