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Does the level of financial development affect renewable energy? Evidence from developed countries with system generalized method of moments (System‐GMM) and cross‐sectionally augmented autoregressive distributed lag (CS‐ARDL)

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  • Oğuz Saygın
  • Ömer İskenderoğlu

Abstract

The relationship between financial development and energy consumption is the most frequently research subject in economy and finance. The main objective of conducting this paper is to answer does financial development have an impact on renewable energy in developed countries? Many papers performed in energy literature, the findings were pointing to the existence of this kind of relationship. In order to examine the relationship between financial development and renewable energy consumption, a total of 23 developed countries, benefited from annual frequency data between 1990 and 2015. In addition to the widely used system generalized method of moments estimation method, models are also estimated with modern estimators using the cross‐sectionally augmented autoregressive distributed lag. As a result of the analysis performed indicates that there is a strong relationship between financial development and renewable energy consumption in developed countries when financial development is measured using banking variables. Otherwise, the estimated coefficients on stock market variables are negative and none of them found statistically significant in all models. These findings are consistent for both estimators.

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  • Oğuz Saygın & Ömer İskenderoğlu, 2022. "Does the level of financial development affect renewable energy? Evidence from developed countries with system generalized method of moments (System‐GMM) and cross‐sectionally augmented autoregressive," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(5), pages 1326-1342, October.
    • Handle: RePEc:wly:sustdv:v:30:y:2022:i:5:p:1326-1342
    DOI: 10.1002/sd.2319
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