The relationship between financial development and renewable energy consumption: an empirical investigation on emerging countries

This paper examines the impact of financial development on renewable energy consumption in seven emerging and growth-leading economies from 2001 to 2015. We include some financial development factors such as domestic credit to the private sector, stock market capitalisation, and financial deposits in our linear regression model. Also, we estimate the fixed effects model with feasible generalised least squares (FGLS) based on the Parks-Kmenta method. The results indicate a positive and statistically significant relationship between domestic credit to the private sector and renewable energy consumption. We also find that the effect of stock market capitalisation is positive on renewable energy consumption. Nevertheless, our findings show that financial system deposits do not significantly impact renewable energy consumption. We also include various control variables and conclude that increases in foreign direct investments and urban population negatively affect renewable energy consumption. Considering these results, we evaluate the energy policies of the selected countries.