The importance of financial development in renewable energy investments: An analysis on E-7 countries

In recent years, factors such as global warming and the depletion of fossil fuel reserves have focused attention on renewable energy sources, which are referred to as clean, local, and endless energy sources. Especially since the 2000s, the share of renewable energy in the total energy of countries has gradually increased. The share of renewable energy investment in this increase is also of great importance. One of the most important issues in realizing renewable energy investment is the provision of funds to invest. A sound and well-developed financial system favors the financing of renewable energy investments with lower costs, thus contributing to the increase of renewable energy investments. For this purpose, the relationship between the 2000-2017 dataset and financial development and renewable energy investment for E-7 countries was investigated using the panel threshold regression method. In addition, the Kao Panel Cointegration, FMOLS and DOLS methods were used to examine the consistency of the results obtained in the panel threshold regression model. The results of the analysis clearly show that there is no linear relationship between financial development and renewable energy investment and there is only one threshold (0.36) for financial development. Financial development has a statistically positive effect on renewable energy investment, both below and above the threshold. However, financial development above the threshold was found to have a positive effect on renewable energy investment, but with diminishing marginal effects. In addition, GDP, patent applications, carbon emissions, inflation and policy index were found to have a statistically significant and positive effect on renewable energy investment, while fossil fuel consumption had a statistically negative effect on renewable energy investment. FMOLS and DOLS results used as alternative model results, which are used as alternative models, also gave similar results with the panel threshold value model, except for carbon emission and fossil fuel consumption.