Exploring the impact of financial development on energy intensity in a global study: Do levels of innovation and technology matter?

The present study aims to investigate the effect of financial development on energy intensity (EI) at different levels of innovation and technology. In addition, this study seeks to answer whether financial development affects EI and how such effect alters in the presence of varying levels of innovation and technology. To this aim, a panel smoothing transition regression (PSTR) method was used on a sample of OPEC + countries during 2000-20. Sectors of financial development affect EI at various levels of innovation and technology differently. Based on the results, the development of the banking sector and stock market increases EI to a certain level of the threshold variable (0.28 and 0.21 %, respectively), which is research and development (R&D) expenditure as a percentage of gross domestic production (GDP). Total financial development affects EI slightly differently. The above-mentioned process reduces EI up to a certain level of the threshold (0.25 %). Then, the process decreases EI more significantly. The present study aims to assess the specific effect of financial development on EI based on the level of innovation and technology. The results indicate that the behavior of the evaluated countries, which plays a significant role in proven oil reserves, crude oil production, and oil trade in the world, becomes similar to that of developed countries after reaching a certain threshold level of innovation and technology.