Financial development and renewable energy consumption in Vietnam: evidence from a wavelet approach

Our research examines the interactions between the financial development (FD) index and environmental factors, including renewable and nonrenewable energy consumption, in Vietnam at a different time and frequency dimensions from 1992 to 2019 using the multivariate wavelet model. Numerous correlations between these variables were located at high frequencies (2–6 years) between 2000 and 2003 and 2009 and 2015 period. Focusing on the financial institution (FI), the regions only located on the high-frequency band (2–6-year frequency band) from 1992 to 2002, 2004 to 2015, and 1995 to 2008. The multiple coherencies between the financial market (FM) and related variables suggest that these regions concentrated on high-frequency bands (from 2 to 12-year) from 1999 to 2005, from 2010 to 2013, and low-frequency bands (from 10 to 12-year) from 2009 to 2013. The partial coherency between FD and nonrenewable energy consumption indicates that during the 1998–2016 period, changes in FD growth led to nonrenewables growth and that the relationship is negative, and vice versa from 2016 to 2019. A partial phase difference between FD and renewable energy consumption (from 1994 to 2008) suggests the anti-phase relation with the rise of renewable consumption. In regard to the partial coherency between FD and CO2 emissions, the results indicate the anti-phase relation with the CO2 emissions growth leading from 1996 to 2007, while CO2 emissions are in-phase with FD leading from 2008 to 2018. Our findings are critical for policymakers to design policies to promote the financial system toward ecological sustainability.