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Non-linear threshold effect of financial development on renewable energy consumption: evidence from panel smooth transition regression approach

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Abstract

Financial development is identified as one of the significant factors that affect energy consumption and has been widely discussed in the literature. However, the association between financial development and renewable energy consumption is still at its earlier stage and is limitedly explored. Therefore, the purpose of this study is to examine the non-linear association between financial development and renewable energy consumption in the top renewable energy consumption countries. The study utilized the newly introduced econometric technique panel smooth transition regression (PSTR) model with two regimes on annual panel data consisted of years 1997–2017. The result confirmed that all the financial development indicators increase renewable energy consumption but affect renewable energy consumption differently. Moreover, the economic growth and industrial structure showed a positive and significant association in both regimes, whereas the population showed a negative relationship with renewable energy consumption in a low growth regime but the association becomes positive in high growth regimes. The study suggested several policies for the top renewable consumption countries.

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Authors and Affiliations

  1. Department of Management Sciences, IQRA University, Karachi, 75300, Pakistan

    Syed Ali Raza & Nida Shah

  2. Faculty of Business Administration and Social Sciences, Mohammad Ali Jinnah University, Karachi, Pakistan

    Muhammad Asif Qureshi

  3. Department of Computer Science, Capital University of Science and Technology (CUST), Islamabad, Pakistan

    Shahzad Qaiser

  4. School of Quantitative Sciences, UUM College of Arts and Sciences, Universiti Utara Malaysia, UUM, 06010, Sintok, Kedah, Malaysia

    Ramsha Ali

  5. Department of Economics & Management Sciences, NED University of Engineering & Technology, Pakistan, Karachi, Pakistan

    Farhan Ahmed

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  1. Syed Ali Raza
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Raza, S.A., Shah, N., Qureshi, M.A. et al. Non-linear threshold effect of financial development on renewable energy consumption: evidence from panel smooth transition regression approach. Environ Sci Pollut Res 27, 32034–32047 (2020). https://doi.org/10.1007/s11356-020-09520-7

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