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Dynamic Effects of Financial Development, Trade Openness and Economic Growth on Energy Consumption: Evidence from South Africa

Author

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  • Abdulkadir Abdulrashid Rafindadi

    (Department of Economics, Faculty of Social Sciences, Usmanu Danfodiyo University, Sokoto, Nigeria,)

  • Ilhan Ozturk

    (Faculty of Economics and Administrative Sciences, Cag University, Mersin, Turkey)

Abstract

This paper investigates whether financial development, trade openness and economic growth add to the energy consumption in South Africa and determine what policy guide could be derived with respect to energy consumption vis- -vis the industrialization process of other African countries for the period of 1970-2011. The unit root properties of the data were examined using the Ng-Perron unit root tests and the traditional structural break unit root tests by Zivot-Andrew was applied. The cointegration properties of the data was observed using the autoregressive distributed lag bounds test approach to cointegration and the Bayer-Hanck combined cointegration test, while the vector error correction method Granger causality approach is applied to examine the causal relationship between the series and this is validated using the innovative accounting approach. Our results show that financial development stimulates energy demand in South Africa; affluence is positively linked with energy consumption, while trade openness also increases energy consumption. We recommend the exploration of several unrestricted energy sources which will sustain the country s leading role as Africa s largest industrial economy, while other rising continents in Africa should note that sustainable energy Granger cause economic growth and thus the secret behind South Africa s leading economic growth prospects.

Suggested Citation

  • Abdulkadir Abdulrashid Rafindadi & Ilhan Ozturk, 2017. "Dynamic Effects of Financial Development, Trade Openness and Economic Growth on Energy Consumption: Evidence from South Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 7(3), pages 74-85.
    • Handle: RePEc:eco:journ2:2017-03-10
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    References listed on IDEAS

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    1. Akinlo, A.E., 2009. "Electricity consumption and economic growth in Nigeria: Evidence from cointegration and co-feature analysis," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 681-693, September.
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    13. Murshed, Muntasir, 2020. "Are Trade Liberalization policies aligned with Renewable Energy Transition in low and middle income countries? An Instrumental Variable approach," Renewable Energy, Elsevier, vol. 151(C), pages 1110-1123.
    14. Magdalena Ziolo & Krzysztof Kluza & Anna Spoz, 2019. "Impact of Sustainable Financial and Economic Development on Greenhouse Gas Emission in the Developed and Converging Economies," Energies, MDPI, vol. 12(23), pages 1-30, November.
    15. Zhang, Jinjun & Abbasi, Kashif Raza & Hussain, Khadim & Akram, Sabahat & Alvarado, Rafael & Almulhim, Abdulaziz I., 2022. "Another perspective towards energy consumption factors in Pakistan: Fresh policy insights from novel methodological framework," Energy, Elsevier, vol. 249(C).
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    17. Lawal, Adedoyin Isola & Ozturk, Ilhan & Olanipekun, Ifedolapo O. & Asaleye, Abiola John, 2020. "Examining the linkages between electricity consumption and economic growth in African economies," Energy, Elsevier, vol. 208(C).
    18. To Trung Thanh & Le Thanh Ha & Hoang Phuong Dung & Tran Thi Lan Huong, 2023. "Impacts of digitalization on energy security: evidence from European countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(10), pages 11599-11644, October.
    19. Ogede Jimoh S. & Tiamiyu Hammed O., 2023. "Does Financial Inclusion Moderate CO2 Emissions in Sub-Saharan Africa? Evidence From Panel Data Analysis," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(3), pages 21-36, September.
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    More about this item

    Keywords

    Energy Consumption; Trade Openness; Financial Development; Bayer-Hanck Cointegration; Economic Growth;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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