On the nexus of financial development, economic growth, and energy consumption in China: New perspective from a GMM panel VAR approach

We underline our findings in three aspects. First, financial development measured by most individual indicators (m2, credit, revenue of the insurance industry, and stock market value) and the comprehensive one has a significantly negative impact on economic growth. Second, energy consumption can significantly contribute to economic growth in all regions, while no feedback effect is found except in the western region. This result is further supported by the Granger causality tests. Last, financial development in the sense of m2, credit, stock turnover, and the comprehensive indicator can significantly lessen energy consumption in all regions. But this inhibitory effect is found to be largest in the western region, followed by the eastern region, and be smallest in the central region. The Granger causality tests confirm further the existence of heterogeneity across regions. A bidirectional Granger causality between the two variables is found in the eastern region, a unidirectional Granger causality running from energy consumption to financial development is identified in the central region, and no significant causal relationship shows up in the western region. Our findings provide valuable policy implications for China heading for a green economic growth.