Hits:

Indexed by:Journal Papers

Date of Publication:2019-12-01

Journal:ENERGY POLICY

Included Journals:EI、SCIE、SSCI

Volume:135

ISSN No.:0301-4215

Key Words:Financial development; Energy intensity; Markov-switching; Vector error correction model; Regime switching; Bangladesh

Abstract:Studies that deal with financial development and energy intensity usually show the single effect of one variable on another or the causality running between them during the whole sample period. But this study is an attempt to explore the regime switching effect of financial development on energy intensity in different periods within the sample. Using yearly data from 1972 to 2017 in case of Bangladesh, a Markov-switching vector error correction model is applied to carry out the study, and the results reveal a two-regime switching nature of the effect of financial development on energy intensity. Financial development plays a stimulating role in regime 1 where it plays an inhibiting role in regime 2 to influence energy intensity. The duration of regime 1 is longer than that of regime 2 specifying that the promoting effect of financial development on energy intensity is more enduring than the inhibiting effect in Bangladesh. The results have important policy implications to formulate energy policy and to maintain a balance between financial development and energy intensity in Bangladesh and other emerging nations.