THE IMPACT OF FINANCIAL DEVELOPMENT ON ENERGY CONSUMPTION: AN APPLICATION ON OECD COUNTRIES

This study examines the impact of financial development on energy consumption in OECD countries using panel cointegration, panel causality and panel cointegration DOLS&FMOLS estimation techniques over the period 1995-2014. The long-run relationship between the variables of financial development and energy consumption is revealed by the Pedroni cointegration test. The Granger causality results show unidirectional causal relationship running from financial development to energy consumption. Causality test results support the conservation hypothesis. To test the reliability of the cointegration test, the model was estimated by DOLS and FMOLS. According to the two estimation methods, the regression coefficients are the same in terms of the directions, but different results are obtained in terms of coefficient magnitudes, in other words, their influence powers and statistical significance. The study revealed that financial development is one of the factors affecting energy consumption in OECD countries in both short and long term