The role of development and financial risk in agricultural energy consumption: an empirical analysis based on country panel data and smooth transition regression.

Abstract

Financial development facilitates farmers' access to credit resources, enabling the adoption of innovative technologies for energy management. On the other hand, long-term planning for agricultural businesses is expected to reduce various types of risks, including financial risk, thus promoting production. Therefore, the aim of this study is to empirically investigate the relationship between development and financial risk with energy consumption in the agricultural sector in Iran and selected developing countries. For this purpose, financial development indicators such as the ratio of deposits and bank facilities to agricultural value-added, as well as economic, financial, and political risk indicators, have been used for two groups of oil-exporting and non-oil-exporting developing countries during the years 2010 to 2020. In order to analyze the data, the Smooth Transition Regression model was used, which allows for examining non-linear relationships between variables. The findings suggest significant differences in the average per capita agricultural energy consumption between the studied oil-exporting and non-oil-exporting countries. Other research results indicate the superiority of non-linear specification relationships between variables and their threshold behavior. Financial development has an inverse effect on per capita energy consumption, and an increase in various types of risk (financial, economic, and political) is associated with an increase in per capita energy consumption in the agricultural sector. The magnitude of the impact of variables in non-oil-exporting countries is generally estimated to be higher than in oil-exporting countries.