Evaluation of the Hypothesis of Nonlinear Relationship between Finance and Energy Investment

Abstract

Because of the consequences of changes in inflation, which affect the behavior of economic agents, the banking system, and the size of investments, high inflation provokes investors to withdraw funds from long-term projects and invest them in the banking sector. This effect reduces potential economic growth. In turn, the low level of inflation, which persists for a sufficient time interval of several years, indicates the stability of the national economy and attracts external and internal investors, contributes to economic growth. Based on this, it can be assumed that the presence of this relationship will be observed when analyzing data from national economies. Therefore, we can distinguish several hypotheses: inflation has a certain relationship with the indicator of financial development (h1); Inflation and financial development have a nonlinear relationship (h2); monetary policy implemented in the state can have a positive impact on the indicators of financial development, which will affect the dynamics of economic growth (h3). For this purpose, a sample was made from five countries: Germany, United States, Canada, China, Japan, and also Russia was selected in addition to them. This group of countries describes different aspects of the financial sector, as well as the level of economic development, so it will allow you to test hypotheses on a sufficient number of examples. The set of macroeconomic indicators of these countries is sufficiently studied, so it was easily amenable to econometric analysis.

Citation

Danish, M.S.S. (2022), "Evaluation of the Hypothesis of Nonlinear Relationship between Finance and Energy Investment", Dinçer, H. and Yüksel, S. (Ed.) Multidimensional Strategic Outlook on Global Competitive Energy Economics and Finance, Emerald Publishing Limited, Leeds, pp. 99-112. https://doi.org/10.1108/978-1-80117-898-320221011