The Impact of Renewable and Non-Renewable Energy Consumption on Financial Development: Evidence from Emerging Countries

Ekonomi, Politika & Finans Araştırmaları Dergisi, 2021, 6(1): 1-15 Journal of Research in Economics, Politics & Finance, 2021, 6(1): 1-15 Araştırma Makalesi / Research Article, DOI: 10.30784/epfad.727864 THE IMPACT OF RENEWABLE AND NON-RENEWABLE ENERGY CONSUMPTION ON FINANCIAL DEVELOPMENT: EVIDENCE FROM EMERGING COUNTRIES Yenilenebilir ve Yenilenemez Enerjinin Finansal Gelişim Üzerindeki Etkisi: Gelişmekte Olan Ülkelerden Kanıtlar Feyyaz ZEREN* & Süleyman Serdar KARACA** Abstract Keywords: Financial Development, Renewable Energy Consumption, NonRenewable Energy Consumption, Panel Cointegration Test, Panel Causality Test JEL Codes: C33, P43, Q20 Energy is an essential factor for countries to accomplish sustainable development and the importance of renewable energy has enhancing day by day. Over the last three decades the relationship between renewable energy consumption (RNW) and economic growth as well as energy consumption (EC) and financial development (FD) has intensely studied. In this paper the relationship between RNW, non-renewable energy consumption (non-RNW) and FD is investigated for top emerging countries of Bloomberg. The financial system deposits to GDP, deposit money bank assets to GDP and private credit to GDP have considered as FD indicators in the paper that investigates the period of 1980-2018. The long-term relationship between the variables was studied with Westerlund (2007) panel cointegration test and the direction of this relationship was examined with Pesaran (2006) CCE-MG panel cointegration estimator. The existence of causality among the variables was analyzed with Dumitrescu and Hurlin (2012) panel causality test. According to the cointegration test results, a positive long-run relationship was found between RNW and FD. Also, there is a bidirectional causality finding between RNW and FD, and there is a one-way causality finding from FD to non-RNW. Özet Anahtar Kelimeler: Finansal Gelişim, Yenilenebilir Enerji Tüketimi, Yenilenemeyen Enerji Tüketimi, Finansal Gelişim, Panel Eşbütünleşme, Panel Nedensellik JEL Kodları: C33, P43, Q20 Enerji, ülkelerin sürdürülebilir kalkınmayı başarması için önemli bir faktördür ve yenilenebilir enerjinin önemi her geçe gün artmaktadır. Son otuz yılda yenilenebilir enerji tüketimi - ekonomik büyüme ve enerji tüketimi - finansal gelişim ilişkileri yoğun bir şekilde araştırılmıştır. Bu çalışmada Bloomberg'in en çok gelişmekte olan ülkeleri için yenilenebilir enerji tüketimi, yenilenemeyen enerji tüketimi ve finansal gelişim arasındaki ilişkiler araştırılmıştır. 1980-2018 dönemini ele alan çalışmada bankalardaki mevduatların GSYİH'ye oranı, finansal sistem mevduatının GSYİH'ye ve özel kredilerin GSYİH'ye oranı finansal gelişim göstergeleri olarak kullanılmıştır. Değişkenler arasındaki uzun vadeli ilişki Westerlund (2007) panel eşbütünleşme testi ile incelenmiş ve bu ilişkinin yönü Pesaran’ın (2006) CCEMG panel eşbütünleşme tahmincisi ile belirlenmiştir. Dumitrescu ve Hurlin (2012) tarafından geliştirilen panel nedensellik testi vasıtasıyla ile değişkenler arasında nedenselliğin yönü araştırılmıştır. Elde edilen panel eşbütünleşme testi sonuçlarına göre, yenilenebilir enerji tüketimi ve finansal gelişim arasında uzun dönemli pozitif yönlü bir ilişki bulunmuştur. Öte yandan, yenilenebilir enerji tüketimi ile finansal gelişim arasında çift yönlü nedensellik bulgusuna rastlanmış olup, finansal gelişimden yenilenemez enerji tüketimine doğru ise tek yönlü nedensellik bulgusu söz konusudur. * Corresponding Author, Assoc. Prof. Dr., Yalova University, Faculty of Economics and Administrative Sciences, Department of International Trade and Finance, , ORCID: 00000003-0163-5916 ** Prof. Dr., Malatya Turgut Özal University, Faculty of Business and Management Sciences, Department of Accounting and Finance, , ORCID: 0000-0002-5424-5359 Makale Geliş Tarihi (Received Date): 27.04.2020 Makale Kabul Tarihi (Accepted Date): 16.11.2020 1 F. Zeren & S. S. Karaca, “The Impact of Renewable and Non-Renewable Energy Consumption on Fınancial Development: Evidence From Emerging Countries” 1. Introduction Renewable energy has become an important factor for countries to achieve sustainable development. Both renewable energy sources and non-renewable sources are important energy sources that affect financial development and economic growth. The KYOTO Protocol United Nations Framework Convention on Climate Change, which came into force in 1994, encourages the countries to reduce greenhouse gas emissions, collaborate on research, technology and protect greenhouse gas sinks (e.g. forests, oceans, lakes). In this context, countries have sought renewable energy sources to reduce their greenhouse gas emissions. Accordingly, the exchange of RNWs between 1948-2015 is presented in Figure 1. Figure 1. Renewable Energy Consumption (Quadrillion Btu) Source: https://www.eia.gov/totalenergy/data/29/10/2019 When the graphic above is analysed, it is clear that Biomass EC has especially increased significantly in recent years. In addition, the view of energy sources from the 2050 perspective by the USA Energy Information Administration (EIA) is as in Figure 2. Figure 2. World Net Electricity Generation (Trillion kilowatt hours), (1990-2050) Source: https://www.eia.gov/todayinenergy/detail.php?id=41533/29/10/2019 2 Ekonomi, Politika & Finans Araştırmaları Dergisi, 2021, 6(1): 1-15 Journal of Research in Economics, Politics & Finance, 2021, 6(1): 1-15 While renewable energy sources are about 30% of world electricity in 2018, this figure is expected to increase to 50% until 2050. In the studies conducted in the last 10 years, it is especially seen that FD has started to take a role in explaining the factors that determine EC. The first examples of studies investigating the relationship between EC and FD coincide in 2009. The first studies to investigate the relationship belongs to Brunnschweiler (2009) and Dan and Lijun (2009). However, the first study to seriously discuss and explain the relationship between EC and FD was conducted by Sadorsky in 2011 and this study pioneered the literature. Sadorsky (2011) stated that the relationship between these two variables may result from several possible reasons. The prices and consumption prices of vehicles that provide EC such as cars, houses, dishwashers and refrigerators can affect the money needs of people. In this context, how EC is priced can indirectly be reflected in FD indicators. In the opposite direction, FD can lead to more economical use of energy resources and, accordingly, to lower EC costs. Besides, the increase in economic prosperity due to the increasing FD may lead to the incentive to spend money comfortably and consequently an increase in EC. In this study, it is aimed to reveal the possible effects of renewable and non-renewable energy consumption on financial development. The differences between renewable and nonrenewable energy consumption are thought to have different effects on (...truncated)