The moderating role of information and communication technology in the nexus between financial development, economic growth and energy consumption

• Published date: 01 December 2022
• Author: Jaleel Ahmed, Raies,Umar Farooq,Bilal Haider Subhani
• Date: 01 December 2022
• DOI: http://doi.org/10.1111/opec.12262

OPEC Energy Rev. 2022;46:399–412.

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399wileyonlinelibrary.com/journal/opec

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INTRODUCTION

In contemporary literature, the significance of financial development (FD) in determining the energy consumption (EC)

and economic growth (EG) has been discussed widely. Different scholars and specialists have considered energy strategy

as the most debated topic in recent literature (Cetin & Bakirtas,2020; Eren et al.,2019). The empirical results in literature

are providing diverse results. However, in previous research, the impact of FD, EG and information communication tech-

nology (ICT) on EC is limited. The current analysis primarily focuses to inspect the impact of FD on EC and EG through

the channel of information communication technology. Previous research clarifies that FD has influenced EC in different

ways. Moreover, the FD impact on utilisation of energy is linked with EG. The advancement in the financial zone stim-

ulates the expansion of the economies; hence, this creates positive outcomes on demand of the energy. Sadorsky(2011)

clarifies the theoretical framework that is related to the direct impact of FD on EG, where his work stressed that the liai-

son between such variables is equivocally. Furthermore, his study claims that the authentic connection and assortment of

DOI: 10.1111/opec.12262

ORIGINAL ARTICLE

Energy Transition

The moderating role of information and communication

technology in the nexus between financial development,

economic growth and energy consumption

JaleelAhmed1

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Raies1

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UmarFarooq2

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Bilal HaiderSubhani2

© 2022 Organization of the Petroleum Exporting Countries.

Abbreviations: ARDL, autoregressive dynamic least square; EC, energy consumption; FD, financial development; GMM, generalised method of

moments; H, human capital; ICT, information communication development; INVST, investment; T, trade openness; URBAN, urbanisation; VAR,

vector autoregressive; VECM, vector error correction model; WDI, World development indicators.

1Department of Accounting and

Finance, Capital University of Science

and Technology (CUST), Islamabad,

Pakistan

2School of Economics and Finance,

Xi'an Jiaotong University, Xi'an, China

Correspondence

Umar Farooq, School of Economics

and Finance, Xi'an Jiaotong University,

Xi'an, Shaanxi, China.

Email: umerrana246@gmail.com

Funding information

National Natural Science Foundation

of China, Grant/Award Number:

72074176

Abstract

This study exposes the potential role of financial development to determine eco-

nomic growth and utilisation of energy. Moreover, it also identifies how informa-

tion communication technology (ICT) moderates this relationship. By sampling a

large range of data from 138 economies for the year 1980– 2020, the current study

employs the panel least square model to test the regression. The result reveals

that economic growth and information communication technology have a posi-

tive significant impact on energy utilisation. Financial advancement has a direct

significant effect on energy utilisation and economic growth. Similarly, the mod-

erating role of ICT was also observed in the current analysis. The current analysis

guides policymakers on the relevant role of financial development in improving

the economic status and consumption of energy. The policymakers in these vari-

ous countries should balance the connection between the supply and demand of

energy to accomplish the sustained development of the economies. Furthermore,

the analysis speaks about the significance of ICT in boosting energy consumption

and gives an important policy recommendation regarding the role of ICT both in

economic growth and energy utilisation.