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The nexus between financial inclusion and energy efficiency in developed countries

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  • Khaliq ul Rehman

    (The University of Lahore)

  • Ruihua Chen

    (Nankai University)

Abstract

This study focuses on the nexus between financial inclusion and energy intensity of G7 nations from 1993 to 2023 with the expectations of presenting energy efficiency as a solution to global energy issues. During the estimation process, this study employs advanced quantile methodologies such as the Quantile unit root tests, the Quantile cointegration analysis, the Quantile-on-Quantile regression, and quantile Granger causality to determine the nonlinear and heteroscedastic relationship between financial access and energy consumption. The study shows that different countries’ cointegration relationship is not symmetric; this means, that financial inclusion reduces energy-intensive countries. This strongly implies that enhanced financial service increases access to technologies and practices such as energy-efficient technology and sustainable energy solutions thereby decreasing the consumption of energy. Further, the study establishes that there is a two-way causality between on one hand, financial inclusion and on the other hand energy intensity, which connects both financial and energy industries. The outcomes also point out that financial inclusion affects each quantile in different manners so policies aimed at the level of financial development and energy consumption should be developed. These observations reinforce the importance of aligning policies aimed at enhancing financial liberalization with energy liberalization in a bid to offer energy to societies. The findings of the study are important for policy makers, especially in underpinning the significance of financial access in controlling energy consumption and achieving the objective of sustainability in the G7 countries.

Suggested Citation

  • Khaliq ul Rehman & Ruihua Chen, 2025. "The nexus between financial inclusion and energy efficiency in developed countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 59(4), pages 3575-3606, August.
    • Handle: RePEc:spr:qualqt:v:59:y:2025:i:4:d:10.1007_s11135-025-02139-1
    DOI: 10.1007/s11135-025-02139-1
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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