Financial Development, Energy Consumption and Trade Openness Nexus: Empirical Evidence from Selected South Asian Countries

Abstract

This study examines the long run relationship and causality across financial development, energy consumption and trade openness for a panel of selected South Asian countries like Pakistan, India, Sri Lanka and Bangladesh. This study covers the period from 1974 to 2013 by using panel data estimation techniques. Pedroni panel Co-integration test has been applied for long run relationship where an evidence of long run relationship has been proved by Pedroni. A bi-directional causality is found between financial development and energy consumption and also for industrial and energy sectors. Uni-directional causality exists from growth to energy consumption and from energy to trade, financial development to industry, economic growth to industry and financial development and trade openness.