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Financial development-energy consumption risk nexus

Author

Listed:
  • Bekhzod Kuziboev
  • Cem Işik
  • Mokhirakhon Mirkhoshimova
  • Samariddin Makhmudov
  • Feruz Kurbanov
  • Azka Amin
  • Stefania Pinzon

Abstract

Currently, examining contribution of financial enhancement in achieving energy efficiency as well as mitigating uncertainties of energy consumption is gaining interest in the literature. Regarding this matter, this research tests the role of financial development on energy consumption risk in a global case applying the panel of 137 countries over the period 2000-2022. For the empirical analysis, Method of Moments Quantile Regression (MMQR), Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegrating Regression (CCR) are used along with the second-generation unit root and cointegration tests. The findings reveal that growth of the financial sector impacts energy consumption risk negatively at all the quantiles from 10% to 90%, indicating 1% increase in financial development mitigates energy consumption risk by -0.003% at median (50%) quantile. The long-run estimations by FMOLS and CCR also indicate the negative effect. As a robustness, instrumental variable (IV) regressions such as Kiviet and Hausman-Taylor models are applied, and the outcome still remains as the previous ones, validating the theoretical linkage. Policy decisions should be implemented considering the economic development, globalization, digitalization and climate change vulnerability in the association of financial enhancement with energy consumption risk.

Suggested Citation

  • Bekhzod Kuziboev & Cem Işik & Mokhirakhon Mirkhoshimova & Samariddin Makhmudov & Feruz Kurbanov & Azka Amin & Stefania Pinzon, . "Financial development-energy consumption risk nexus," Politická ekonomie, Prague University of Economics and Business, vol. 0.
    • Handle: RePEc:prg:jnlpol:v:preprint:id:1551
    DOI: 10.18267/j.polek.1551
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