راهبرد مدیریت مالی (Jun 2024)
The Effect of Financial Development on the Decoupling of Energy Consumption and Economic Growth
Abstract
There is a vast literature on the effect of financial development on energy consumption, however, this important question has not been answered whether financial development can be effective in decoupling energy consumption from economic growth. This is despite the fact that decoupling is in the direction of sustainable development and as decarbonization of economic activities and increasing energy security. The main goal of this research is to answer the recent question and test this hypothesis that financial development can improve the decoupling of energy consumption and economic growth. For this purpose, the method of generalized method of moments used for 64 selected countries based on the maximum available data during the period of 2002-2021. The results of this research show that the state of decoupling of energy consumption and economic growth in the studied countries is in the first region of Tapio and in the range of weak decoupling. Also, based on the estimation results of the current research model, financial development improves decoupling in the first district of Tapio (confirmation of the research hypothesis). According to the results, although the variables affecting energy consumption (including: financial development, economic freedom and human development) have contributed to the decoupling, but overall, the effects of these variables have not been able to fundamentally change the decoupling period. It seems that decoupling in the selected countries needs to be transferred to the fourth region of Tapio, where energy consumption decreases and economic growth increases, and this requires the application of soft policies, especially targeted financial development and energy-oriented efficiency. And upgrading energy hardware and technology through financial development to reduce energy intensity. Overall, based on the results of this research, although financial development has improved decoupling, it is necessary for financial development to have a sustainable development approach for strong decoupling.
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