Muhammad, Shahbaz and Lean, Hooi Hooi (2011): Does Financial Development Increase Energy Consumption? Role of Industrialization and Urbanization in Tunisia.
Download (147kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Does Financial Development Increase Energy Consumption? Role of Industrialization and Urbanization in Tunisia|
|English Title:||Does financial development increase energy consumption? role of industrialization and urbanization in Tunisia|
|Keywords:||Energy Consumption; Financial Development; Economic Growth|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy
|Depositing User:||Muhammad Shahbaz|
|Date Deposited:||06. Sep 2011 10:02|
|Last Modified:||31. Dec 2015 02:50|
Abu-Bader, S., Abu-Qarn, A.S., 2008. Financial development and economic growth: the Egyptian experience. Journal of Policy Modeling 30, 887-898.
Altinay, G., Karagol, E., 2005. Electricity consumption and economic growth: evidence from Turkey. Energy Economics 27, 849-856.
Ang, J.B., 2008. Economic development, pollutant emissions and energy consumption in Malaysia. Journal of Policy Modeling 30, 271-278.
Apergis, N., Payne, J.E., 2009b. Energy consumption and economic growth: evidence from the Commonwealth of Independent States. Energy Economics 31, 641-647.
Apergis, N., Payne, J.E., 2010. Energy consumption and growth in South America: Evidence from a panel error correction model. Energy Economics 32, 1421-1426.
Apergis, N., Payne, J.E., 2009a. Energy consumption and economic growth in Central America: evidence from a panel cointegration and error correction model. Energy Economics 31, 211-216.
Aqeel, A., Butt, M.S., 2001. The relationship between energy consumption and economic growth in Tunisia. Asia-Pacific Development Journal 8, 101-110.
Arestis, P., Stein, H., 2005. An institutional perspective to finance and development as an alternative to financial liberalization. International Review of Applied Economics 18, 381-398.
Bairer, S.L., Dwyer, Jr, G.P., Tamura, R., 2004. Does opening a stock exchange increase economic growth? Journal of International Money and Finance 23, 311-331.
Bannerjee, A., Dolado, J., Mestre, R., 1998. Error-correction mechanism tests for cointegration in single equation framework. Journal of Time Series Analysis 19, 267-83.
Bartleet, M., Gounder, R., 2010. Energy consumption and economic growth in New Zealand: results of trivariate and multivariate Models. Energy Policy 38, 3505-3517.
Bascom, W.O., 1994. The economics of financial reform in developing countries. London: Macmillan.
Beakert, G., Harvey, C.R., Lumsdaine, R.L., 2002. Dating the integration of world equity markets. Journal of Financial Economics 65, 203-247.
Beakert, G., Harvey, C.R., 2000. Foreign speculators and emerging equity markets. Journal of Finance 52, 565-614.
Beakert, G., Harvey, C.R., Lundblad, C., 2001. Emerging equity markets and economic development. Journal of Development Economics 66, 465-504.
Beakert, G., Harvey, C.R., Lundblad, C., 2005. Does financial liberalization spur growth? Journal of Financial Economics 77, 3-55.
Belloumi, M., 2009. Energy consumption and GDP in Tunisia: cointegration and causality analysis. Energy Policy 37, 2745-2753.
Boulila, G., Trabelsi, M., 2004. The causality issues in the finance and growth nexus: empirical evidence from Middle East and North African Countries. Review of Middle East Economics and Finance 2, 123-138.
Bowden, N., Payne, J.E., 2009. The causal relationship between US energy consumption and real output: a disaggregated analysis. Journal of Policy Modeling, 31, 180-188.
Claessens, S., Laeven, L., 2004. What drives bank competition? some international evidence? Journal of Money, Credit and Banking 36, 563-583.
DeJong, D.N., Nankervis, J.C., Savin, N.E., Whiteman, C.H., 1992. Integration versus trend stationarity in time series. Econometrica 60, 423-433.
Dow, S., 1996. European monetary integration, endogenous credit creation and regional economic development. In Vence-Deza, X. & Metcalfe, J. (eds) Wealth from Diversity: innovation and structural change and finance for regional development in Europe, Kluwer, 293-306.
Fung, H.K., 2009. Financial development and economic growth: convergence or divergence? Journal of International Money and Finance 28, 56-78.
Ghosh, S., 2002. Electricity consumption and economic growth in India. Energy Policy 30, 125-129.
Halicioglu, F., 2007. Residential electricity demand dynamics in Turkey. Energy Economics 29, 199-210.
Harris, R., Sollis, R. 2003. Applied time series modeling and forecasting. Wiley, West Sussex.
Islam, F., Shahbaz, M., Alam, M., 2011. Financial development and energy consumption nexus in Malaysia: a multivariate time series analysis. MPRA paper 28403, University library of Munich, Germany.
Jiang, W., Gao, W., 2007. The impact of industrialization on China’s energy consumption. School of City Development, University of Jinan, Jinan 250022, China.
Kaminsky, G., Schmukler, S., 2003. Short-run pain, long-run gain: the effects of financial liberalization. NBER working paper no. 9787.
Karanfil, F., 2008. Energy consumption and economic growth revisited: does size of underground economy matter? Energy Policy 36, 3019-3025.
Karanfil. F., 2009. How many times again will we examine the energy–income nexus using a limited range of traditional econometric tools? Energy Policy 36, 3019-3025.
King, R.G., Levine, R., 1993. Finance and growth: Schumpeter might be right. Quarterly Journal of Economics 108, 717–738.
Kraft, J., Kraft, A., 1978.On the relationship between energy and GNP. Journal of Energy and Development 3, 401-403.
Lee, C.C., Chang, C.P., 2008. Energy consumption and economic growth in Asian economies: a more comprehensive analysis using panel data. Resources and Energy Economics 30, 50-65.
Levine, R., 1996. Financial development and economic growth: views and agenda. Policy research working paper series 1678, The World Bank.
Lucas, R.E., 1988. On the mechanism of economic development. Journal of Monetary Economics 22, 3-42.
Lütkepohl, H., 1982. Non-causality due to omitted variables. Journal of Econometrics 19, 367-378.
Lui, Y., 2009. Exploring the relationship between urbanisation and energy consumption in China using ARDL (autoregressive distributed lag) and FDM (factor decomposition model. Energy 34, 1846-1854.
Mankiw, N.G., Scarth, W., 2008. Macroeconomics: third Canadian Edition. Worth Publishers, New York.
McKinnon, R.I., 1973. Money and capital in economic development. Brookings Institution, Washington, DC (1973).
Minier, J., 2009. Opening a stock exchange. Journal of Development Economics 90, 135-143.
Mishra, V., Sharma, S.S., Smyth, R., 2009. Is economic development export-led or import-led in the Pacific Island Countries? evidence from panel data models. Pacific Economic Bulletin 25, 46-63.
Morimoto, R., Hope, C., 2004. The impact of electricity supply on economic growth in Sri Lanka. Energy Economics 26, 77-85.
Naceur, S.B., Samir, G., 2007. Stock markets, banks, and economic growth: empirical evidence from the MENA region. Research in International Business and Finance 21, 297-315.
Narayan, P.K., 2005. The saving and investment nexus for China: evidence from cointegration tests. Applied Economics 17, 1979-1990.
Ng, S., Perron, P., 2001. Lag length selection and the construction of unit root test with good size and power. Econometrica 69, 1519-1554.
Odhiambo, N.M., 2009. Energy consumption and economic growth nexus in Tanzania: An ARDL bounds testing approach. Energy Policy 37, 617-622.
Pesaran, M.H., Shin, Y., Smith, R., 2001. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 16, 289-326.
Rogoff, K., 2004. Extending the limits of global financial integration. Journal of Policy Modeling 26, 519-523.
Sadorsky, P., 2010. The impact of financial development on energy consumption in emerging economies. Energy Policy 38, 2528-2535.
Shahbaz, M., Islam, F., Islam, M.M., 2010. The impact of financial development on energy consumption in Pakistan: evidence from ARDL bounds testing approach to cointegration. The 2nd International Conference on the Role of Social Sciences and Humanities in Engineering (ICoHSE) 2010. 12-14 Nov. 2010, VENUE: Bayview Beach Resort, Penang, Malaysia.
Shrestha, M., Chowdhury, K., 2007. Testing financial liberalization hypothesis with ARDL modeling approach. Applied Financial Economics 17, 1529-1540.
Stern, D.I., 2000. A multivariate cointegration analysis of the role of energy in the U.S. macroeconomy. Energy Economics 22, 267-283.
Stern, N., 1989. The economics development: a survey. Economic Journal 100, 597-685.
Stiglitz, J., 2000. Capital market liberalization, economic growth, and instability. World Development 28, 1075-1086.
Wolde-Rufael, Y., 2009. Energy consumption and economic growth: the experience of African countries revisited. Energy Economics 31, 217–224.
Yucel, F., 2009. Causal relationships between financial development, trade openness and economic growth: the case of Turkey. Journal of Social Sciences 5, 33-42.