Abstract
To satisfy human needs and desires, it is necessary to produce goods and services that require the use of some production factors, such as labor, capital, and energy, among others. Nowadays, energy is a key production factor for economic activity in all countries. The main objective of this paper is to analyze the relationship between energy, economic growth, urbanization, and financial development in the country-members of the North American Free Trade Agreement (NAFTA) during the period of 1971–2015. Panel data Econometric methods are applied in this research, namely cross-section dependence (Pesaran test), unit root (Cross-sectional Augmented Dickey Fuller and Cross-sectional Im, Pesaran, and Shin tests), cointegration (Kao and Fisher–Johansen tests), and heterogeneous causality (Hurlin and Dumitrescu test). The results achieved in this research demonstrate that the variables of this model are characterized by a cross-section dependence, and they are integrated in order one. An equilibrium or long-term relationship between them exists. By means of the Fully Modified OLS and Dynamic OLS estimators it this demonstrated that there is a positive relationship between GDP and EC, while there is a negative relationship between FD, CPI, URB, and TO and EC. The economic policy recommendations drawn from this investigation are that financial development promotion, urbanization, and trade openness may contribute to reducing energy consumption in these countries.
Highlights
It is important to consider that energy is used to produce most of the goods and services that satisfy the wishes and needs of the world population, so it is crucial to know its determinants
Modified Ordinary Least Squares (OLS) and Dynamic OLS estimators it this demonstrated that there is a positive relationship between Gross Domestic Product (GDP) and energy consumption (EC), while there is a negative relationship between financial development (FD), consumer price index (CPI), URB, and trade openness (TO) and EC
6,6,ininthe causalrelationship relationshipfrom fromFD, FD,TO, TO, CPI, GDP, and with respect to level of significance, which implies that any movement of these
Summary
It is important to consider that energy is used to produce most of the goods and services that satisfy the wishes and needs of the world population, so it is crucial to know its determinants. Energy consumption, production, and international trade tend to move together [1]. For the NAFTA countries from 1970 to 2017, the population of Canada went from 17.9 to 36.7 million people; Mexico went from 38.17 to 129.16 million people; and the United States went from 180.67 to 325.71 million people [2]. The world energy consumption has had a similar behavior, growing from 1.33 to 1.92 million kg of oil equivalent per capita from 1971 to. In the case of the NAFTA countries in the same period, Canada went from 4.25 to 7.60, the United
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