Is the impact of financial development on energy consumption in Jamaica asymmetric?

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PurposeThe purpose of this study is to determine whether causal asymmetries exist between energy consumption and three dimensions of financial development in Jamaica.Design/methodology/approachThe authors use the non-linear autoregressive distributed lag method to identify the long- and short-run associations between energy consumption and different measures of financial development in Jamaica for the period 1980 to 2018.FindingsThere are two central findings. First, cointegrating relationships run from the dimensions of financial development to energy consumption. Second, the authors find asymmetries in these relationships. In the long run, asymmetries are such that rising levels of financial development have a neutral impact on energy consumption. By contrast, falling levels of financial development in the long run are associated with increases in energy consumption. In the short run, the authors find evidence of asymmetries only in changes in the overall level of financial development on energy consumption.Practical implicationsOne practical implication is that for Jamaica to avoid some of the potential negative environmental consequences resulting from the positive impact on energy consumption arising from falling levels of financial development, a strong financial development policy will be important.Social implicationsThere will be positive social impacts from financial development in the area of climate finance.Originality/valueTo the authors’ knowledge, this is the first study on Jamaica that examines the financial development–energy nexus. Further, the authors use relatively new and comprehensive measures of financial development.