Does Financial Development and Renewable Energy Matter for Economic Development? A Study of Emerging Economies

Using panel data from emerging nations from 1990 to 2019, we evaluated the impact of financial development and renewable energy usage on economic growth. We used the panel unit root test, panel cointegration test, FMOLS and DOLS methods, and the VECM causal Granger technique to do this. The results of the cointegration test show that the variables are in short- and long-term equilibrium. Furthermore, the FOMLS and DOLS findings show that FDI, REC, and FD have a favorable and significant impact on economic growth in emerging economies. In the short and long run, the VECM results reveal that there is a stable two-way relationship between financial development and economic growth. The findings also suggest that renewable energy use in emerging countries may have a long-term impact on growth rates. Furthermore, there is a one-way relationship in the countries between financial prosperity and renewable energy.