The Impact of Financial Development on Energy Consumption in ASEAN-6: A Quantile Regression Analysis

Abstract

This study intends to determine the effects of financial development on the consumption of renewable Energy in the ASEAN-6 (Indonesia, Malaysia, Thailand, Singapore, Philippines, and Vietnam) from 2000 to 2020. Panel data of the variable Renewable Energy Consumption, and financial development measured using banking sector indicators represented by Domestic credit to the private sector by banks (DC) and Bank's capital to assets ratio (BC), as well as capital market sector indicators represented by the Market capitalization of listed domestic companies (MC) and Stocks traded total value (ST), obtained from the World Bank. This study got two critical points conclusion based on the findings of the analysis utilizing the quantile regression model. First, for banking sector indicators, Domestic credit to the private sector by banks (DC) has a significantly positive effect on Renewable Energy Consumption. However, Bank's Capital to Assets Ratio (BC) has no impact on Renewable Energy Consumption. Second, in capital market sector indicators, the market capitalization of registered domestic companies (MC) variable has a negative and significant impact on Renewable Energy Consumption. While the Stocks Traded Total Value (ST) has a positive and significant impact on Renewable Energy Consumption (REC). This highlights that the financialization track needs to be strengthened, according to ASEAN-6 policymakers. In order to increase demand for renewable Energy, the banking industry and capital market must be able to support high-quality finance allocations that significantly influence productivity and economic growth. Citizens should also be aware of environmental issues and renewable energy benefits.