The Relationship between Financial Development, Economic Growth and Energy Consumption in Iran: A Band ARDL and Toda-Yamamoto Test Approach

This paper examines the relationship between financial development، economic growth and energy consumption in Iran. Many papers have used various indicators for financial development. In this study، we have tried to examine the effect of all indicators of financial development on energy consumption using BAND ARDL، Based on Unrestricted Error Correction Model (UECM)، (Pesaran، Shin and Smith، 2001) and TODA-YAMAMOTO test (1995) for the period of 1976-2010. The findings show that various indicators such as the ratio of allocated credits to the private sector to GDP، M2، the ratio of stocks traded to the trading volume of stocks markets and economic growth، have a long run relationship with energy consumption. Further، the findings confirm the unilateral causality from financial development and economic growth to energy consumption.