Abstract
We investigate the relation between financial development, energy consumption, and economic growth in the economy of Lebanon over the period 2000M2–2010M12. Our findings confirm the existence of cointegration among the variables. The results indicate that financial development and energy consumption contribute to economic growth in Lebanon. The impact of energy consumption on economic growth is positive showing the significance of energy as a main stimulant of economic growth. Financial development is also found to play a vital role in enhancing economic growth. Financial development and economic growth also result in further increase in energy consumption. We offer some policy implications specific to Lebanon considering the recent discovery of large oil and gas reserves in the country and the historical importance of its banking sector which remains a center of Lebanon’s service-oriented economy.
Highlights
Energy economics has drawn substantial attention from academicians in recent times
The objective of this paper is to examine the existence of long run relationship among energy consumption, financial development, and economic growth for Lebanon using monthly data over the period of 2000M2– 2010M12
Overall our results show that the feedback effect is found between financial development and energy consumption but it is stronger from energy consumption to financial development
Summary
Energy economics has drawn substantial attention from academicians in recent times. A number of studies have investigated the causal relationship between energy consumption and economic growth. This issue is important because energy drives the wheels of economic growth since it is a key factor of production, along with capital, and labor. The higher the GDP per capita, the more the energy demand, which is a relation that is intuitively appealing. Kraft [1] confirms this by providing evidence of unidirectional causality from GNP to energy use for the US over the period 1947–1974
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