Energy Consumption and Financial Development: Evidence from MENA Countries with Panel Hidden Cointegration

Abstract

Energy is an important parameter that gives clues about the developments in economies. Energy consumption (EC) in countries gives a summary of the economic structures of those countries. Today, the attention-grabbing component of economic growth, apart from the real sector determinants, is considered to be financial development. In this study, the relationship between EC and financial development in MENA countries is examined. Econometric analyzes are carried out by Hatemi J (2011) Panel Hidden Cointegration Test and Panel VECM analysis in the study covering the period between 1980 and 2017. The test results have showed that there is no cointegration between the original values of the variables, but there is a long-term relationship between some of the positive and negative components. Therefore, it has been determined that there is a hidden cointegration between the series. In light of these findings, the cointegration and especially the long-term causality relationship between the components of the variables reveal that the change in financial development indicators is effective on energy consumption.