Politická ekonomie X:X | DOI: 10.18267/j.polek.1551

Financial development-energy consumption risk nexus

Bekhzod Kuziboev, Cem Işik, Mokhirakhon Mirkhoshimova, Samariddin Makhmudov, Feruz Kurbanov, Azka Amin, Stefania Pinzon
Bekhzod Kuziboev, Department of Economics, Urgench State University, Urgench, Uzbekistan
Cem Işik (corresponding author), Department of Economics, Faculty of Economics and Administrative Sciences, Anadolu University, Eskişehir, Turkey; University College, Korea University, Seoul, Republic of Korea; Baku Eurasian University, Economic Research Center (BAAU-ERC), Baku, Azerbaijan; Western Caspian University, Economic Research Center (WCERC), Baku, Azerbaijan; Advance Research Centre, European University of Lefke, Lefke, Northern Cyprus, Turkey
Mokhirakhon Mirkhoshimova, Cluster Development Department, Center for Economic Research and Reforms, Tashkent, Uzbekistan
Samariddin Makhmudov, Department of Economics, Mamun University, Khiva, Uzbekistan
Feruz Kurbanov, Department of Tourism, Urgench State University named after Abu Rayhan Biruni, Urgench, Uzbekistan
Azka Amin, Institute of Energy Policy and Research, Universiti Tenaga Nasional, Kajang, Malaysia
Stefania Pinzon, Esai Business School, Universidad Espiritu Santo, Samborondón, Ecuador

Currently, examining contribution of financial enhancement in achieving energy efficiency as well as mitigating uncertainties of energy consumption is gaining interest in the literature. Regarding this matter, this research tests the role of financial development on energy consumption risk in a global case applying the panel of 137 countries over the period 2000-2022. For the empirical analysis, Method of Moments Quantile Regression (MMQR), Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegrating Regression (CCR) are used along with the second-generation unit root and cointegration tests. The findings reveal that growth of the financial sector impacts energy consumption risk negatively at all the quantiles from 10% to 90%, indicating 1% increase in financial development mitigates energy consumption risk by -0.003% at median (50%) quantile. The long-run estimations by FMOLS and CCR also indicate the negative effect. As a robustness, instrumental variable (IV) regressions such as Kiviet and Hausman-Taylor models are applied, and the outcome still remains as the previous ones, validating the theoretical linkage. Policy decisions should be implemented considering the economic development, globalization, digitalization and climate change vulnerability in the association of financial enhancement with energy consumption risk.

Keywords: Financial development, energy consumption risk, Method of Moments Quantile Regression, Fully Modified Ordinary Least Squares, Canonical Cointegrating Regression

Received: August 29, 2025; Revised: January 17, 2026; Accepted: February 9, 2026; Prepublished online: May 30, 2026 

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