Spatial relationship between financial development, energy consumption and economic growth in emerging markets

Purpose - The study aims to discover the spatial relationship between financial development, energy consumption and economic growth in 11 ASIA countries, using panel data from 1980 to 2016. Design/methodology/approach - The study applies three popular spatial models, namely, (1) spatial error model (SEM), (2) spatial autoregressive model (SAR) and (3) spatial Durbin model (SDM), to explore the direct and spillover effect of financial development and energy consumption on economic growth. Furthermore, a novel test proposed by Juodiset al.(2020) is employed to check the Granger non-causality between each pair of variables. Findings - The empirical outcomes found direct and spillover effects of financial development and energy consumption on economic growth in 11 ASIA countries. Accordingly, an expansion of the financial development in countryiis beneficial for the growth of the host country and neighboring countries, and vice versa. However, an increase in energy consumption in country i leads to a decrease in the economic growth of neighboring countries. The test of Granger non-causality indicated a bidirectional causality between financial development and economic growth, and unidirectional causality running from economic growth to energy consumption. Research limitations/implications - Spillover effects of financial development and energy consumption on growth have largely been ignored in previous studies, especially in emerging countries. Thus, the study enriches the literature and provides some policy implications for ASIA countries. Practical implications - Spillover effects of financial development and energy consumption on growth have largely been ignored in previous studies, especially in emerging countries. Thus, the study enriches the literature and provides some policy implications for ASIA countries. Originality/value - Spillover effects of financial development and energy consumption on growth have largely been ignored in previous studies, especially in emerging countries. Thus, the study enriches the literature and provides some policy implications for ASIA countries.