Causal Nexus between Financial Development and Energy Consumption: Evidence from Bootstrap Panel Granger Causality Approach

This paper examined the causal relationship between financial development and energy consumption for a panel of nine African countries for the time period running from 1971 to 2014. In particular, the paper applied the bootstrap panel causality Granger causality test. The bootstrap panel Granger approach was adopted by the study because it allows both cross-sectional dependence and heterogeneity across countries. The results from the bootstrap panel Granger causality test indicate the presence of a unidirectional causality running from energy consumption to financial development for Congo Republic, Nigeria, Senegal and Zambia but not vice versa. However, for the rest of the sample countries, the two variables have no causal influence on each other. These results suggest that energy consumption promotes financial development in Congo Republic, Nigeria, Senegal and Zambia.