Empirics on influencing mechanisms among energy, finance, trade, environment, and economic growth: a heterogeneous dynamic panel data analysis of China.

The current study empirically examines the influencing mechanisms among energy consumption, financial development, international trade, environment, and economic growth for 29 Chinese provinces and cities for periods 1997 to 2016. A new augmented growth model has been developed, introducing financial development as a shift factor of aggregate production, international trade as determinant of total factor productivity, and energy consumption as input of production function. The key empirical findings include (1) financial development exposed dual nature in terms of its influence on energy consumption and carbon emissions. Banking-based financial development is revealed to add in energy consumption and carbon emissions, while stock market-based financial development curtailed energy consumption and mitigated the carbon emissions, improving the environmental quality, (2) GDP growth is uncovered to add to international trade with varying magnitudes in all samples; however international trade imparted negative to neutral to positive influence on GDP growth in W-region, C-region, and E-region, respectively. It is named as competitiveness driven growth deceleration/neutrality/acceleration influence. It states that as regions/countries develop, the domestic industry gets competitive in international trade markets; consequently, the influence of international trade on economic growth transforms from negative to neutral to positive, (3) both type of financial development measures imparted significant positive influence on GDP growth which confirms the Schumpeterian view to be valid in regional China, (4) based on causality from quadratic terms of GDP, international trade, and financial development ratio to carbon emissions growth confirm the existence of conventional EKC as well as international trade and financial development based EKC in all regions except W-region for which conventional EKC and international trade based EKC are not confirmed. Finally, based on empirical influencing mechanisms, the relevant policies are recommended.