Impact of financial development on energy consumption in China : a spatial spillover analysis

Financial development is an important factor affecting energy consumption, but the impact of financial development on energy consumption may not be linear. This paper explores the nonlinear correlation between financial development and energy consumption from the perspective of spatial spillover using a sample of 30 provinces in China from 2005 to 2018. We analyze financial development from three perspectives of indirect finance, direct finance and financial openness. The main findings are yielded as follows. (1) The stock market exerts an inhibitory effect, while bank loans demonstrate a promoting effect on energy consumption. (2) The spatial spillover effects of the stock market and bank loans differ due to the competitive and catch-up effects. (3) Foreign direct investment (FDI) decreases energy consumption in a region as well as in surrounding areas. (4) In terms of regional heterogeneity, evident differences are found across regions. The results suggest that policymakers should encourage the development of the stock market and balance the development of the stock market among different regions, vigorously develop green lending, improve market-oriented conditions to attract foreign capital and give full play to the positive role of FDI in energy conservation and emission reduction.