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Does financial development and trade openness enhance industrial energy consumption? A sustainable developmental perspective

Does financial development and trade openness enhance industrial energy consumption? A... The purpose of this paper is investigate the dynamic linkages among industrial energy use, industrial value added, financial development (FD) and trade openness, in case of India. The study covers the annual frequency data on both aggregate and disaggregate variables for the period 1971–2016.Design/methodology/approachThe autoregressive distributed lag bounds testing approach is applied to examine the long-run relation among variables under consideration. Also, Johansen and Juselius (1990) and vector error-correction mechanism results confirm the result of cointegration. Furthermore, non-linear relationship in the model is also tested.FindingsIt has been found that there exists long-run relationship among variables. Long-run estimates show that increasing FD leads to more energy uses. Hence, FD should be directed in such a way that it incentivises firms to invest in energy-efficient technology. Furthermore, it is also found that study supports the evidence of conservative hypothesis, which supports that the energy conservation policy should be adopted in the industrial sector. Energy efficiency programme needs to be designed very carefully to achieve a higher level of energy efficiency. This leads to a sustainable growth and low carbon emission.Originality/valueThis paper examines the recent trend in Indian industrial energy consumption and does a comprehensive analysis using a robust econometric method. We have developed a lucid model to examine the deriving factors of industrial energy consumption. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management of Environmental Quality An International Journal Emerald Publishing

Does financial development and trade openness enhance industrial energy consumption? A sustainable developmental perspective

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References (78)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1477-7835
DOI
10.1108/meq-03-2019-0060
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is investigate the dynamic linkages among industrial energy use, industrial value added, financial development (FD) and trade openness, in case of India. The study covers the annual frequency data on both aggregate and disaggregate variables for the period 1971–2016.Design/methodology/approachThe autoregressive distributed lag bounds testing approach is applied to examine the long-run relation among variables under consideration. Also, Johansen and Juselius (1990) and vector error-correction mechanism results confirm the result of cointegration. Furthermore, non-linear relationship in the model is also tested.FindingsIt has been found that there exists long-run relationship among variables. Long-run estimates show that increasing FD leads to more energy uses. Hence, FD should be directed in such a way that it incentivises firms to invest in energy-efficient technology. Furthermore, it is also found that study supports the evidence of conservative hypothesis, which supports that the energy conservation policy should be adopted in the industrial sector. Energy efficiency programme needs to be designed very carefully to achieve a higher level of energy efficiency. This leads to a sustainable growth and low carbon emission.Originality/valueThis paper examines the recent trend in Indian industrial energy consumption and does a comprehensive analysis using a robust econometric method. We have developed a lucid model to examine the deriving factors of industrial energy consumption.

Journal

Management of Environmental Quality An International JournalEmerald Publishing

Published: Sep 2, 2019

Keywords: India; Energy consumption; Financial development; Trade openness; Industrial value added; Q40; Q43; Q47; Q48

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