Financial development-energy consumption risk nexus
Politicka Ekonomie, vol.75, 2026 (SSCI, Scopus)
- Publication Type: Article / Article
- Volume: 75
- Publication Date: 2026
- Doi Number: 10.18267/j.polek.1551
- Journal Name: Politicka Ekonomie
- Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM, EconLit, Political Science Complete, Political Science Abstract (IPSA)
- Keywords: Canonical Cointegrating Regression, energy consumption risk, Financial development, Fully Modified Ordinary Least Squares, Method of Moments Quantile Regression
- Open Archive Collection: AVESIS Open Access Collection
- Anadolu University Affiliated: No
Abstract
Currently, examining contribution of financial enhancement in achieving energy efficiency as well as mitigating uncertainties of energy consumption is gaining interest in the literature. Regarding this matter, this research tests the role of financial development on energy consumption risk in a global case applying the panel of 137 countries over the period 2000–2022. For the empirical analysis, Method of Moments Quantile Regression (MMQR), Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegrating Regression (CCR) are used along with the second-generation unit root and cointegration tests. The findings reveal that growth of the financial sector impacts energy consumption risk negatively at all the quantiles from 10% to 90%, indicating 1% increase in financial development mitigates energy consumption risk by −0.003% at median (50%) quantile. The long-run estimations by FMOLS and CCR also indicate the negative effect. As a robustness, instrumental variable (IV) regressions such as Kiviet and Hausman–Taylor models are applied, and the outcome still remains as the previous ones, validating the theoretical linkage. Policy decisions should be implemented considering the economic development, globalization, digitalization and climate change vulnerability in the association of financial enhancement with energy consumption risk.