Financial Markets, Innovations and Cleaner Energy Production in OECD Countries

55 Pages Posted: 9 Apr 2016 Last revised: 26 Apr 2018

See all articles by Md Al Mamun

Md Al Mamun

La Trobe University - Department of Economics and Finance

Kazi Sohag

Muhammad Shahbaz

Montpellier Business School- Energy and Sustainable Development

Shawkat M. Hammoudeh

Montpellier Business School; Drexel University - Lebow College of Business

Date Written: June 5, 2015

Abstract

Using a large sample of 25 Organization for Economic Co-operation and Development (OECD) countries, we provide evidence that the growth of equity and credit markets promotes cleaner energy (biomass renewable energy, non biomass renewable energy, and total bio and non-bio renewable energy) production in those countries. We also find that the 2008 global financial crisis (GFC) adversely affects the production of cleaner energy. Our results are robust to alternative definitions of financial market development, cleaner energy, and controlling for the effect of government subsidy on cleaner energy. By supporting the demand-induced supply of cleaner energy, we demonstrate that the positive and significant effect of financial market development (FMD) on cleaner energy is stronger in countries with higher growth in carbon intensity and a lower availability of fossil fuels than otherwise. Our results also support the argument that financing uncertain projects such as those that produce cleaner energy should be greater in countries with a higher innovation culture than those where financial markets are already accustomed to undertaking risky investments. The overall results are also robust under the conditions of short-run and long-run homogeneity and the cross-sectional dependence in the sample. Policy implications are also provided.

Keywords: Biomass and cleaner energy production, common correlated effects pooled (CCEP), credit and equity markets, global financial crisis, innovation.

JEL Classification: F21, P48, Q42.

Suggested Citation

Al Mamun, Md and Sohag, Kazi and Shahbaz, Muhammad and Hammoudeh, Shawkat M., Financial Markets, Innovations and Cleaner Energy Production in OECD Countries (June 5, 2015). Energy Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2759670 or http://dx.doi.org/10.2139/ssrn.2759670

Md Al Mamun (Contact Author)

La Trobe University - Department of Economics and Finance ( email )

Melbourne, 3086

Muhammad Shahbaz

Montpellier Business School- Energy and Sustainable Development ( email )

Shawkat M. Hammoudeh

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Drexel University - Lebow College of Business ( email )

3141 Chestnut Street
Philadelphia, PA 19104
United States
2158956673 (Phone)
2158956975 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/HammoudehS/

No contact information is available for Kazi Sohag

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