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Exploring the Role of Financial Development on Energy Consumption in Turkiye

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  • Karahan-Dursun, Pınar

    (Mudanya University)

Abstract

This study investigates the impact of financial development on energy consumption in Turkiye from 1985 to 2019. To this end, the study employs Bound test, ARDL model and VECM-based causality test. In the empirical analysis, economic growth and foreign direct investment are included in the estimated model. The results of the Bound test indicate that there is cointegration between the series. The results of the estimated ARDL model show that financial development contributes to the increase in energy consumption both in the long run and in the short run. The results of the long-run ARDL model show that a 1% increase in financial development leads to an increase in energy consumption by 0.36%. The study also concludes that economic growth is a driver of energy use, while human capital negatively affects energy consumption in the long-run. The results of the causality test in the VECM framework reveal that there is a causal relationship from financial development to energy consumption in the short run, and all explanatory variables together are Granger causes of energy consumption in the long run.

Suggested Citation

  • Karahan-Dursun, Pınar, 2025. "Exploring the Role of Financial Development on Energy Consumption in Turkiye," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 16(2), pages 125-136, April.
    • Handle: RePEc:ris:buecrj:0682
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    More about this item

    Keywords

    Financial Development; Energy Consumption; Economic Growth; ARDL; VECM Causality Test;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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