Does financial development have a non-linear impact on energy consumption? Evidence from 30 provinces in China

Abstract

This paper uses a sample of 30 provinces in China for the period 1997–2017 to examine the relationship between financial development and energy consumption. Based on the traditional convergence hypothesis, this paper constructs a functional convergence model and explores the dynamic convergence of energy consumption. The results show that there is a significant threshold effect between financial development and energy consumption. There is an inverse-U shaped relationship between foreign investment ratio, financial efficiency, and energy consumption. Besides, financial interrelations ratio and insurance depth increase energy consumption. The trend of China's energy consumption tends to be consistent. In the eastern region, the growth rate of energy consumption is negatively correlated with the initial level. There is only a σ convergence effect on energy consumption in the central region. However, the difference in energy consumption in the western region is continually expanding.