A revisit to the relationship between financial development and energy consumption: Is globalization paramount?

Abstract

The pace of globalization continues to increase, expanding economic activities around the globe and influencing energy consumption in both developing and developed countries. However, views have become different on whether globalization increases or decreases energy consumption. The present research investigates the nexus among financial development, globalization, and energy consumption from 1980 to 2017 by conducting a newly developed method, bootstrap auto-regressive distributive lag (BARDL) by McNown et al. [1] for the empirical estimation. Empirical results confirm that both globalization and financial development increase energy consumption in Pakistan. Further per capita GDP promotes energy consumption. Sound financial systems attract foreign investors and improve economic efficiency, but the role of globalization cannot be left out of the development process. This new finding provides direction for policymakers who seek to improve energy efficiency.