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The nexus between financial development and energy consumption in the EU: A dynamic panel data analysis

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  • Çoban, Serap
  • Topcu, Mert

Abstract

The relationship between financial development and energy consumption has newly started to be discussed in energy economics literature. This paper investigates this issue in the EU over the period 1990–2011 by using system-GMM model. No significant relationship is found in the EU27. The empirical results, however, provide strong evidence of the impact of the financial development on energy consumption in the old members. Greater financial development leads to an increase in energy consumption, regardless of whether financial development stems from banking sector or stock market. By contrast, we find for the new members that the impact of financial development on energy consumption depends on how financial development is measured. Using bankindex the impact of financial development displays an inverted U-shaped pattern while no significant relationship is detected once it is measured using stockindex.

Suggested Citation

  • Çoban, Serap & Topcu, Mert, 2013. "The nexus between financial development and energy consumption in the EU: A dynamic panel data analysis," Energy Economics, Elsevier, vol. 39(C), pages 81-88.
  • Handle: RePEc:eee:eneeco:v:39:y:2013:i:c:p:81-88
    DOI: 10.1016/j.eneco.2013.04.001
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    Keywords

    Financial development; Energy consumption; System-GMM; EU;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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