||Financial development and energy consumption
||Master's Program in Economics and Finance, Department of Economics
||The major objective of this paper is to investigate the nonlinear relationship between energy consumption and financial development while incorporating income, trade, urbanization, and industrialization. The investigation will include the panel data sets of 95 countries covering 1990-2015 are used, and the investigation mainly is conducted with the dynamic system GMM method to address the problem of heteroskedasticity and serial correlation caused by the reduced form dynamic model. In this study, financial development indicators are proxied as stock market indicators and banking indicators. The paper investigates not only the depth and efficiency of financial development but also banking concentration and banking competition. The Empirical results present that for the characteristic of size, efficiency, and activity, stock market indicators have a U-shaped relationship with energy consumption, and banking indicators have an inverted U-shaped relationship with energy consumption. In the case of banking competition and banking concentration, the empirical results show that more competitive the banking systems are can reduce energy consumption. Based on the empirical analysis, policymakers should focus on the banking sector's development to reduce energy consumption. Moreover, governments should focus on increasing the competitiveness in banking sectors.
||Table of Contents
1 Introduction 1
2 Literature Review 4
2-1 Time-series studies for the finance-energy nexus 4
2-2 Panel studies for the finance-energy nexus 9
3 Data and Model Specification 15
3-1 Model specification and methodology 15
3-2 Data 17
4 Empirical Results 23
4-1 Linear relationship 23
4-2 Nonlinear relationship 30
5 Conclusion 37
Appendix A: Country List with Means 42
Lists of Table
Table 1: Literature review of time-series studies 7
Table 2: Literature review of penal studies 13
Table 3: Descriptive statistics 22
Table 4: Linear effects of financial development on energy use per capita 24
Table 5: Linear effects of financial development on energy use per GDP 28
Table 6: Nonlinear effects of financial development on energy use per capita 31
Table 7: Nonlinear effects of financial development on energy use per GDP 35
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