The role of financial openness and China’s income on fossil fuels consumption: fresh evidence from Latin American countries

Abstract

The impact of China’s financial openness and economic growth on consumption of fossil fuels was analyzed for a panel of ten Latin American countries, throughout 34 years (from 1980 to 2014). An autoregressive distributed lag in the form of unrestricted error correction model was used as the chosen econometric methodology. The results showed that the financial openness, as well as the economic growth of China, increase the fossil fuels consumption in the long-run, while the economic growth of Latin American countries increases the energy use in the short- and the long-run. Moreover, the empirical findings of this research have significant consequences to the local government’s appraisal of the relationship between financial openness, China’s economic growth and consumption of fossil fuels.