THE IMPACT OF FINANCIAL DEVELOPMENT ON RENEWABLE ENERGY CONSUMPTION IN KENYA

The objective of this study is to examine the impact of financial sector development on economic growth in Sri Lanka by taking two complementary sectors, namely banking and equity markets, to represent the financial sector. All previous studies in the Sri Lankan context have examined this relationship employing either the banking sector variables or equity market variables to represent the financial sector. This study is in favour of the supply-leading hypothesis and it tests the empirical validity of the hypothesis. The proposed model has been estimated with five banking sector variables and two equity market variables. Autoregressive Distribution Lag (ARDL) bounds testing approach is employed to identify the existence of short- and long-run relationships. The study relies on quarterly data from 2002:01 to 2020:04. Findings reveal that there exists a long-run relationship between financial sector variables and economic growth. More specifically, the size of financial intermediaries, interest rate, monetization, and size of the stock market have a significant positive impact on economic growth in the long-run. Somewhat surprisingly, the availability of credit to the private sector has a significant negative impact. All seven variables significantly influence economic growth in the short-run. Overall, the results of this study support the supply-leading hypothesis or the notion that financial sector development affects economic growth. These findings are mostly in line with previous literature. The results of seven diagnostic tests show that the estimated model is adequate for the purpose and estimation results are reliable. The study has some important policy implications. 
 Keywords: Financial sector development, Economic growth, Banking sector development, Equity market development, ARDL

Decarbonizing economies requires an energy transition from conventional energy resources to renewable and clean energy resources. However, this transition largely depends upon the availability of huge investments to manage high start‐up costs and operational infrastructure. In this respect, the financial sector can play a vital role. This study explores the financial sector's role in renewable energy consumption utilizing a comprehensive measure of financial sector development constituting both financial institutions and financial markets. Moreover, the study utilizes an advanced econometric technique “dynamic panel threshold model” on panel data of 165 countries ranging from 1980 to 2019. The empirical analysis reveals the presence of a threshold value of 0.191, 0.196, and 0.008 for the overall financial development index, financial institutions index, and financial market index, respectively. This finding confirms the presence of a U‐shaped curve between financial sector development and renewable energy consumption, validating the existence of the financial Kuznets curve. Thus, initially, financial sector development results in lower renewable energy consumption while after reaching the threshold level it boosts renewable energy consumption. Furthermore, the study also shows the statistically significant role of economic growth, trade openness, and inflation in explaining renewable energy usage. The obtained outcomes suggest a pressing necessity to improve both financial institutions and markets to surpass the threshold levels of financial sector performance within the financial sector, thus supporting a rise in renewable energy consumption.

Does nuclear or renewable energy consumption help to control environmental pollution? New evidence from China

The call for the world to shift to clean energy use is increasing, with renewable energy sources accounting for over 29% of global power generation. The current study analyses the effects of industrialization, export expansion, trade, urbanisation, and clean energy use on environmental pollution in 10 largely industrialised and export‐based economies: China, the USA, Japan, Germany, India, the UK, the Netherlands, Italy, France, and Russia, using 1990–2022 data. According to the Environmental Kuznets Curve (EKC) hypothesis, this paper confirms that industrialization and export expansion contributes to environment pollution because they increase CO 2 emissions and energy consumption. Urbanisation and trade also raise the pollution level. Using clean energy reduces ecological harm, since a 1% increase in clean energy use reduces the pollution rate by 0.28%. The study employs robust econometrics methods to validate the findings derived from the Driscoll–Kraay Standard Error model; fully modified ordinary least squares, dynamic ordinary least squares, and cross‐sectional autoregressive distributed lag. The empirical evidence indicates that policy intervention, such as promoting green technology, stringent ecological controls, and providing incentives for renewable energy consumption, is implicated in reducing the environmental costs of export‐led and industrial growth. This research offers policymakers an operations framework for sustainable economic development and reducing environmental pollution.

The United Nations's Sustainable Development Goals (SDGs) is international cooperation that aims to climate change mitigation, and encourage the use of clean energy. Investing in green technology to reduce carbon dioxide (CO2) emissions is among the most important objective of the SDGs. As the USA is part of this collaboration, the present study tries to examine the progress of one State to meet the Global Goals. This paper uses the autoregressive distributed lags (ARDLs) approach and Granger causality test to evaluate the dynamic relationships uniting gross domestic product (GDP), CO2 emissions, renewable energy consumption (REC), and research and development (R&D) for the California State over the period 1987-2017. The outcome of the econometric analysis proved that REC affects CO2 emissions in the short run, and vice versa. In addition, a bidirectional relationship is detected between GDP and R&D and CO2 emissions and REC Granger causes GDP. In the long run, REC, R&D, and GDP Granger cause CO2 emissions, while REC, R&D, and CO2 emissions Granger cause GDP. We also found a bidirectional causality linking CO2 emissions and GDP. The long-run elasticities show that R&D and GDP impact positively CO2 emissions whereas REC affects it. Thus, R&D increases pollution but REC reduces it. Environmental degradation is perhaps related to the excessive consumption of fossil energy in most activities. California is advised to enhance the effort to meet the SDGs. Encouraging R&D of low carbon technologies and applying several taxations for non-renewable fuel adoption may also constitute a useful strategy to protect the environment.

Effects of renewable energy consumption and financial development: Using Nigeria’s economy as a case study

Symmetric and asymmetric impact of economic growth, capital formation, renewable and non-renewable energy consumption on environment in OECD countries

The main purpose of this research article is to determine the impact of financial sector development on environmental degradation in Pakistan. The study used the time series data of the financial sector development on environmental degradation (CO2 emission) in Pakistan during the period of 1974-2018. Due to the nature of the times series data, the Augmented Dicky Fuller test is used to detect the level of stationarity in the data. Mixed orders of the stationarity in the data are reported, and the Auto Regressive Distributed Lag model is the best technique to provide efficient results. The ADF result clearly shows that the variables except for Y, Y2, and Y3 are stationarity in the first order, while the mentioned variables are stationarity at a level. And Trade openness is stationary at first difference. The bound test results (the F-statistic value is 5.208 that exceeded the values of upper bounds value, i.e., 3.28 at a 5% significance level. Therefore, the co-integrational relationship is confirmed for the model of the study at a 5% significance level. The model depicts the impact of Financial Sector Development on environmental degradation regarding CO2 emission. It was found that FSD negatively affected environmental degradation in Pakistan in both the long and short run during the period from 1974 to 2018. The impact of PG, EC and FDI is positive and statistically significant in the long run. The impact of TO on CO2 emission is negative and significant in the long run. On the other hand side, negative shock can produce harmful effects on the environment. A positive and significant relationship is reported regarding economic growth and CO2 emission. The impact of Population growth, Financial Development Index, Trade Openness, Energy Consumption, and Economic growth is also positive and significant to CO2 emission. It is quite evident from the detailed examination of the above model. This study concluded that financial sector development efficiently contributes to long-term and short-term environmental degradation. Financial sector development negatively and significantly affects environmental quality as measured by CO2. Therefore, it is concluded that the financial sector can be used as a policy tool to reduce CO2 emission in Pakistan based on the data set from 1974-2018.

This study empirically analyzes the impact of financial sector development on the inflation rate in Tanzania, focusing on credit to the private sector as a proxy for financial sector growth. Quarterly time series data are collected from 2003 to 2023. Autoregressive Distributed Lag (ARDL) Model estimation with a bound cointegration test establishes the short and long-term relationship. The results show that financial sector development increases the inflation rate in the long run. The findings underscore the importance of balancing financial sector expansion with measures to control inflation and ensure that credit growth supports sustainable economic development.

Publisher Summary This chapter discusses the financial development and economic growth in underdeveloped countries. An observed characteristic of the process of economic development over time, in a market-oriented economy using the price mechanism to allocate resources, is an increase in the number and variety of financial institutions and a substantial rise in the proportion not only of money but also of the total of all financial assets relative to GNP and to tangible wealth. Typical statements indicate that the financial system somehow accommodates—or, to the extent that it malfunctions, it restricts—growth of real per capita output. Such an approach places emphasis on the demand side for financial services; as the economy grows it generates additional and new demands for these services, which bring about a supply response in the growth of the financial system. In this view, the lack of financial institutions in underdeveloped countries is simply an indication of the lack of demand for their services.

Clean energy initiatives in Pakistan: Driving sustainable development and lowering carbon emissions through environmental innovation and policy optimization.

Chapter 17 - Is there an asymmetric causality between renewable energy and energy consumption in BIC countries?

This study considers the impacts of financial development and the consumption of renewable energy in Lebanon for the period 1990–2021, employing the Environmental Kuznets Curve. The financial sector in Lebanon is considered a major engine in the economic development. Green energy sources and environmental protection are taking higher importance nowadays with the increase of implications for climate change and global warming worldwide. This paper examines the Environmental Kuznets Curve’s presence and implications for Lebanon’s financial development and renewable energy consumption. The econometric model used annual data from the World Development Indicators. Utilizing the autoregressive distributed lag (ARDL) technique, both near- and long-term relationships were estimated. The findings support the Environmental Kuznets Curve hypothesis and show that energy consumption and real income have a statistically significant beneficial effect on carbon emissions and that their square has a statistically significant negative impact on carbon emissions over the long and short term. The results show variations in signs for financial development between the short and long term and stable results for renewable energy with negative signs in both terms. These results show the importance of further research on the influence of financial development and green energy consumption on EKC. Therefore, policymakers need to pay more attention to these variables for a sustainable economy that is facing the effects of climate change.

Urban residential energy switching in China between 1980 and 2014 prevents 2.2 million premature deaths

Renewable energy production and consumption has a triggering effect on the components associated with the energy sector. This study aims to analyze the effects of renewable energy generation and consumption on economic growth in Türkiye for the period 1990-2020 based on annual data. For the analyses in the study, the vector autoregression model (VAR) and Johansen cointegration test, vector error correction, and Granger causality are used for the data of renewable energy consumption (REC, percentage of total final energy consumption), renewable electricity generation (REG, per capita electricity generation from renewables), and economic growth (GDP constant 2010 US$). According to the findings from the study, no causality was found from production to gross domestic product from renewable energy consumption in the short run, but causality from renewable energy consumption to gross domestic product was found. In the long run, it can be said that renewable energy consumption is not the cause of gross domestic product, but gross product is the cause of renewable energy consumption.