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Modeling the dynamic influences of economic growth and financial development on energy consumption in emerging economies: Insights from dynamic nonlinear approaches

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  • Xie, Qichang
  • Bai, Dingchuan
  • Cong, Xiaoping

Abstract

This article evaluates the dynamic impacts of economic growth and financial development on energy consumption in emerging economies from 1998 to 2019. The total financial development and its submeasures of financial institution and financial market development are applied in consideration of the different dimensions of financial development. In doing so, we apply a new dynamic semiparametric additive panel model to address potential dynamicity and nonlinearity. Moreover, the dynamic panel threshold model is recommended to explore the dynamic threshold effect of income growth on energy pressure under different financial development indicators, complementing the gap in the existing research on nonlinear mechanisms regarding this topic. Our findings do not indicate the presence of the EKC hypothesis but verify that income growth can reinforce energy pressure. Total financial improvement and financial market development both display an inverted “U-shaped” nonlinear influence on energy expenditure, while financial institution development can directly ease energy pressure. We also find that financial development performs a significant threshold effect in the linkage between income growth and energy expenditure. The higher the total financial development and financial market development levels are, the stronger the contribution of economic growth on energy pressure; however, the unfavorable influence of economic growth on energy pressure is receded with the increase in financial institution development. Some policy implications are provided for reducing energy poverty through optimizing economic and financial advancement.

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  • Xie, Qichang & Bai, Dingchuan & Cong, Xiaoping, 2022. "Modeling the dynamic influences of economic growth and financial development on energy consumption in emerging economies: Insights from dynamic nonlinear approaches," Energy Economics, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:eneeco:v:116:y:2022:i:c:s0140988322005333
    DOI: 10.1016/j.eneco.2022.106404
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