The Nexus between Wind Energy Consumption, Economic Growth and Financial Development: Evidence from Panel Causality and Cointegration Test with Fourier Function

Abstract

It is known that many countries have made intensive researches and made important technological developments in order to benefit from the wind energy potential, and even in today's conditions, they use some of this potential economically. In the light of these developments, it is important to investigate the relationship between wind energy, especially in the financial markets, and therefore with the economies of the countries. This study aimed to the relationship among wind energy consumption (WIND), economic growth (GDP) and financial development (FIN) for 26 selected OECD countries in period of January-2016 and November-2020. The long-term nexus between the panels has been investigated with fourier panel cointegration and fourier panel causality tests, which detect smooth transition multiple structural breaks using trigonometric functions. According to the panel cointegration test results, the panels move together in the long run, positively for WIND-FIN and negatively for WIND-GDP. Moreover, there is causality relations from both FIN and GDP to WIND. This is a support indicate that wind energy use is costly. Therefore, it would be beneficial to achieve both FIN and GDP to increase the use of renewable energy. When the country-based results are examined, it is understood that there is no causality relationship for 16 countries and that there is unidirectional (neutrality hypothesis) or bidirectional causality for the remaining 6 countries (growth or conservation hypothesis). The findings provide valuable information for policymakers about wind energy investment. In addition, bureaucratic difficulties and deficiencies related to wind energy should be reduced, the private sector should contribute more to renewable energy investments, and individuals should be made aware that renewable energy sources can replace non-renewable energy sources.