The short and long run causality relationship among economic growth, energy consumption and financial development: Evidence from South Mediterranean Countries (SMCs)

This study aims at examining the short-run and long-run causal link between economic growth, energy consumption and financial development by using data set of 6 SMCs for the 1995–2015 periods. The basic testing procedure requires four steps: ADF and PP unit root tests, Bound tests for Co-integration, ARDL approach and VECM method. The results confirm cointegration between the variables. It means that the long-run relationship exists. The short-run causal relationships (unidirectional) exist at least once for each country (except Egypt). The Granger causality results for individual countries give mixed results. These results urge for the attention of the policy makers in SMCs to design a comprehensive energy conservation policy to minimize the consequences of massive energy consumption on economic growth by adding financial development. •Examine the short and long-run causal link between growth, energy, and financial development.•Multi-step procedure has applicate: Co-integration, ARDL approach and VECM method.•The Granger causality results for individual countries give mixed results.•Design a comprehensive energy policy to minimize the consequences of massive energy on growth by adding financial development.