THE ENERGY CONSUMPTION-FINANCIAL DEVELOPMENT RELATIONSHIP FOR G-7 COUNTRIES FROM PANEL QUANTILE REGRESSION APPROACH

Abstract

This study focused on examining the relationship among energy prices, financial development, foreign direct investments and economic growth on energy consumption for G-7 countries covered the 1980-2018 data period. We take into energy use as a dependent variable to project countries energy consumption and also financial development is measured by using BankDindex and BondDindex variables, for economic growth GDP per capita, net inflows for foreign direct investment and Brent crude oil price for energy prices. It has been applied the panel quantile regression model which is a new robust econometric method and two models are established. The empirical findings suggest that diverse variables have a clearly heterogeneous effect on energy use. An increase in both energy prices and foreign direct investments increases energy consumption. In Model 1, the effect of financial development on low energy consumption levels is lower, while the effect of the Banking sector is higher in countries with medium and high energy consumption. In Model 2, the Bond sector has a high impact in countries with low energy consumption but is meaningless. It has a positive and significant effect at levels with medium and high energy consumption. The impact of the banking sector on energy consumption is three times greater than the debt sector. In addition, the banking sector has a significant effect on the quantiles of low EC. We found another results for policymakers, to use financial development role in the economic growth process.