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Does Financial Development Increase Energy Consumption? Role of Industrialization and Urbanization in Tunisia

  • Muhammad, Shahbaz
  • Lean, Hooi Hooi

This paper assesses the relationship among energy consumption, financial development, economic growth, industrialization and urbanization in Tunisia from 1971-2008. The autoregressive distributed lag bounds testing approach to cointegration and Granger causality tests are employed for the analysis. The result confirms the existence of long-run relationship between energy consumption, economic growth, financial development, industrialization and urbanization in Tunisia. Moreover, financial development, industrialization and urbanization are positively related to energy consumption especially in the long-run. Long-run bidirectional causal relationships are found between financial development and energy consumption, financial development and industrialization, and industrialization and energy consumption. Hence, sound and developed financial system which can attract investors, boost the stock market and improve the efficiency of economic activities should be encouraged in the country. Nevertheless, promoting industrialization and urbanization can never be left out from the process of development. On the other hand, the unidirectional causality from energy consumption to financial development implies that government should implement loose monetary policy which will stimulates investment activities and enhances economic growth and hence the energy consumption.

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File URL: https://mpra.ub.uni-muenchen.de/33194/1/MPRA_paper_33194.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33194.

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Date of creation: 01 Sep 2011
Date of revision: 06 Sep 2011
Handle: RePEc:pra:mprapa:33194
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