Financial development and energy consumption are closely intertwined. A well-functioning financial sector facilitates investment in energy infrastructure, while energy availability supports economic activity that generates financial intermediation. Cointegration analysis for Turkey reveals a long-run bidirectional relationship between financial development indicators and energy consumption.
Channels — Financial development affects energy use through several channels: credit availability for energy-intensive industries, financing for renewable projects, and household access to credit for durable goods and vehicles. Energy consumption, in turn, supports GDP growth, which drives financial sector expansion.
Implications — Policymakers should consider the financial-energy nexus when designing regulations. Green finance initiatives, sustainable banking, and climate risk disclosure can channel financial development toward low-carbon energy investment, aligning financial and energy transition objectives.