Linking financial development, economic growth and energy consumption in Pakistan

This paper aims at exploring the finance-growth-energy nexus for Pakistan over the 1972-2012 period. By employing the system GMM estimation technique, the study tries to capture the impact of financial development over energy consumption through economic growth channel and includes energy prices and urbanization in the structural model. The study finds positive and significant impact of economic growth and urbanization on energy consumption, while the effect of energy prices over energy consumption is significant but negative. Financial development positively and significantly affects energy consumption through the economic growth channel. Our analysis is important for policy makers for effective energy demand planning and conservation policies that would ensure sustainable economic development as well as serve as motivation to search alternative energy sources to meet the bourgeoning energy demand in Pakistan.