Electricity Consumption and Financial Development: Evidence from Selected EMEs: Evidence from a Panel ARDL-PMG Approach

The impact of electricity consumption on financial development is a critical issue in the emerging market economies (EMEs), with no consensus amongst scholars and policy-makers on its impact on financial development. This paper investigates the long-term and causal relationship between electricity consumption and financial development using panel cointegration analysis and the error correction model for a panel of 20 se-lected EMEs from 2000 to 2020. The findings indicate a positive long-term cointegrating relationship between electricity consumption and financial development. There is a stable long-run equilibrium, as confirmed by the error correction term, with a deviation correction of 29% per period. The result of the study highlights the importance for EMEs to prioritise investments in energy infrastructure that will act as a catalyst for financial development. Furthermore, there is a need for policies that align electricity consumption with financial development goals. This ensures that there is sustainable energy access is a key ingredient in financial stability in emerging markets.