Is the impact of financial development on energy consumption in Jamaica asymmetric?
International Journal of Energy Sector Management
ISSN: 1750-6220
Article publication date: 31 May 2022
Issue publication date: 18 May 2023
Abstract
Purpose
The purpose of this study is to determine whether causal asymmetries exist between energy consumption and three dimensions of financial development in Jamaica.
Design/methodology/approach
The authors use the non-linear autoregressive distributed lag method to identify the long- and short-run associations between energy consumption and different measures of financial development in Jamaica for the period 1980 to 2018.
Findings
There are two central findings. First, cointegrating relationships run from the dimensions of financial development to energy consumption. Second, the authors find asymmetries in these relationships. In the long run, asymmetries are such that rising levels of financial development have a neutral impact on energy consumption. By contrast, falling levels of financial development in the long run are associated with increases in energy consumption. In the short run, the authors find evidence of asymmetries only in changes in the overall level of financial development on energy consumption.
Practical implications
One practical implication is that for Jamaica to avoid some of the potential negative environmental consequences resulting from the positive impact on energy consumption arising from falling levels of financial development, a strong financial development policy will be important.
Social implications
There will be positive social impacts from financial development in the area of climate finance.
Originality/value
To the authors’ knowledge, this is the first study on Jamaica that examines the financial development–energy nexus. Further, the authors use relatively new and comprehensive measures of financial development.
Keywords
Citation
McFarlane, A., Brown, L., Campbell, K. and Das, A. (2023), "Is the impact of financial development on energy consumption in Jamaica asymmetric?", International Journal of Energy Sector Management, Vol. 17 No. 4, pp. 677-692. https://doi.org/10.1108/IJESM-02-2022-0004
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited