How does financial development affect energy consumption? Evidence from 21 transitional countries

Financial development significantly impacts energy consumption. This paper uses cross-country panel data from 21 transitional countries for the period 2006-2015 while considering different financial development indicators and nonlinear relationships between financial development and energy consumption. This is done by selecting five financial development indicators to measure financial development and testing linear and nonlinear relationships between financial development and energy consumption. It found the following: First, there are no significant linear relationships between financial development and energy consumption. Financial development does have significant nonlinear impacts on energy consumption in transitional countries with estimated nonlinear parameters that are significant. Second, financial development affects energy consumption in transitional countries in differing ways. Financial intermediation development positively affected energy consumption in all the countries studied. Stock markets development led decreased energy consumption in China and Poland. Financial openness development reduced energy use except in Georgia and the Kygyz Republic.