The financial sector expansion effect on renewable electricity production: case of the BRICS countries
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The financial sector expansion effect on renewable electricity production: case of the BRICS countries Aliya Zhakanova Isiksal1 Received: 18 April 2020 / Accepted: 24 September 2020 © Springer Nature B.V. 2020
Abstract This purpose of the research is to determine the financial expansion index effect on renewable electricity production for Brazil, Russia, India, China, and South Africa (BRICS countries) from 1995 to 2015. Principal component analysis is applied to generate a bank-based and stock market-based index of financial expansion. The article uses three recently developed estimators, namely Mean Group, Augmented Mean Group, and Common Correlated Effects Mean Group Estimators. The empirical results showed that there is no evidence of inverse U-shaped impacts of financial expansion index on renewable electricity production. The results demonstrate that the financial expansion index has a positive influence on renewable electricity production in total, including and excluding the hydroelectricity for the panel of BRICS countries; a larger effect was observed when non-hydropower renewable electricity was considered. The Dumitrescu–Hurlin (DH) causality test outcomes represent that there are one-way causalities running from the financial expansion index to hydroelectricity and the financial expansion index to the production of sustainable electricity in total. Therefore, the production of renewable electricity in total and hydroelectricity are driven by financial expansion. However, there is a one-way causation moving from the production of renewable electricity from non-hydropower to financial expansion, which shows that the latter is driven by an increase in renewable non-hydroelectricity. Policy implications are provided at the end of this study. Keywords BRICS · Renewable electricity production · Financial expansion index · AMG · CCEMG
1 Introduction There is a vast amount of literature that has examined the association between financial expansion and energy demand (Sadorsky 2010; Coban and Topcu 2013); however, the effect of financial expansion on renewable electricity production (hydropower, wind energy, solar power, biomass power, geothermal power, marine power, etc.) is an area that has not received sufficient consideration in the literature. * Aliya Zhakanova Isiksal [email protected] 1
Near East University, Department of Banking and Accounting, 99138 Nicosia, Mersin 10, Turkey
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Financial expansion plays an important role as it can raise the effectiveness of the financial system of a region and the demand for renewable electricity. It allows for the promotion of activities such as raising the banking transactions or raising stock market expansion. If it is found that financial expansion affects the production of renewable electricity, then it becomes important for energy policy planning and strategies for carbon emissions. Financial expansion is also important for the economy due to various reasons: It reduces the financial exposure and the cr
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