Effects of financial development on energy consumption: The role of country risks

This study explores the impacts of country risks on the relationship between energy consumption and financial development for 79 countries. By using the panel smooth transition regression model, this study finds non-linear relationships between variables that is, the relationships differ in higher and lower risk environments. We show that banking sector development has larger impacts on energy consumption than does stock market development. The results of the full sample show under the stable country risk environments that financial development could help to reduce energy consumptions. Lastly, the results offer that different types of financial development and country risk environments have varying impacts on energy consumption in OECD and non-OECD countries. (c) 2020 Elsevier B.V. All rights reserved.