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

The paper investigates the long-term and causal relationship between petroleum consumption and financial development in selected emerging market economies (EMEs) for the period 2000 to 2020. The study uses a panel cointegration and an error correction model (ECM). The study investigates both the short-run and long-run dynamics of petroleum consumption and financial development. The study confirms the energy-led growth hypothesis and demonstrates a positive long-run relationship between petroleum consumption and financial development. The short run, on the other hand, reveals insignificant effects. From these findings, it is indicative that petroleum consumption does not have an immediate effect on financial development. The study outlines the need for effective energy policies in the enhancement of financial markets and sustainable economic growth. Hence, it is important for energy infrastructure investments, financial linkages in the energy sector, and mitigating the risks of petroleum dependency through diversification strategies.