Exploring the Role of Financial Development on Energy Consumption in Turkiye

Pınar Karahan-Dursun
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Pınar Karahan-Dursun: Mudanya University

Business and Economics Research Journal, 2025, vol. 16, issue 2, 125-136

Abstract: This study investigates the impact of financial development on energy consumption in Turkiye from 1985 to 2019. To this end, the study employs Bound test, ARDL model and VECM-based causality test. In the empirical analysis, economic growth and foreign direct investment are included in the estimated model. The results of the Bound test indicate that there is cointegration between the series. The results of the estimated ARDL model show that financial development contributes to the increase in energy consumption both in the long run and in the short run. The results of the long-run ARDL model show that a 1% increase in financial development leads to an increase in energy consumption by 0.36%. The study also concludes that economic growth is a driver of energy use, while human capital negatively affects energy consumption in the long-run. The results of the causality test in the VECM framework reveal that there is a causal relationship from financial development to energy consumption in the short run, and all explanatory variables together are Granger causes of energy consumption in the long run.

Keywords: Financial Development; Energy Consumption; Economic Growth; ARDL; VECM Causality Test (search for similar items in EconPapers)
JEL-codes: C32 O13 O16 (search for similar items in EconPapers)
Date: 2025
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