Abstract
In this study we use system GMM estimation techniques to examine the dynamic effect of financial development on energy consumption with a panel data set on 29 provinces during the period 1999-2009 in China. The empirical results show a positive and statistically significant relationship between financial development and energy consumption when financial development is measured by the ratio of loans in financial institution to GDP and by the ratio of FDI to GDP. These results have critical implications for energy policy where the impact of financial development on energy consumption, especially, the short effect from the development of bank loan scale and the long effect from the development of FDI, is important to improve the political effect.
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