Econometric Prediction on the Effects of Financial Development and Trade Openness on the German Energy Consumption: A Startling Revelation

Abdulrashid Rafindadi ()

International Journal of Energy Economics and Policy, 2015, vol. 5, issue 1, 182-196

Abstract: This study aims to predict the effects of financial development and Trade openness on the German energy consumption. To ensure this, the study used time series data from 1970- 2013. Following to this, the Zivot-Andrew structural break unit root test, the Bayer-Hank combined cointegration test, the ARDL bounds test and the VECM Granger causality test were applied. The findings of the study confirmed the existence of cointegration among the variables. As a result, the study discovered that economic growth adds to energy demand in Germany. Surprisingly, financial development, capital use and Trade openness were found to decline energy demand. It was discovered that a 1% increase in economic growth influence energy consumption by 2.1053%., while a 1% increase in financial development, capital use and Trade openness decrease energy consumption by 0.1863%, 0.9269%, 0.2091% respectively. The causality analysis reveals the existence of feedback effect between financial development and energy consumption and same inference was found to exist between trade openness and energy consumption. The results of the Granger causality analysis reveal that economic growth Granger-cause energy consumption, financial development, capital use and trade openness in Germany. In the light of this, the study advocates for a continued investment effort in renewable energy and the adoption of those policies and strategies that will promote the use of green technologies at the industrial level. While at the household level, investment should be encouraged in the appropriate energy infrastructure that could assist with the simultaneous satisfaction of efficient energy usage.

Keywords: Economic Growth; Financial Development; Trade; Energy; Germany (search for similar items in EconPapers)
JEL-codes: C61 D24 Q42 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.econjournals.com/index.php/ijeep/article/view/941/579 (application/pdf)
http://www.econjournals.com/index.php/ijeep/article/download/941/579 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2015-01-15

Access Statistics for this article

International Journal of Energy Economics and Policy is currently edited by Ilhan Ozturk

More articles in International Journal of Energy Economics and Policy from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().