The Impact of Energy Consumption and Financial Development on Economic Growth in the United States: An ARDL Bounds Testing Approach

This study investigates the impact of energy consumption and financial development on economic growth using neo-classical production function in the case of US. The ARDL (Autoregressive distributed lag) bounds testing approach with additional variables (energy consumption and financial development) is used to investigate cointegration during the period of 1967-2012 in US. The ARDL reveals a cointegration relationship among energy consumption, financial development, capital and economic growth. Energy consumption and financial development reveal short term impacts but no long-term impacts on economic development. Capital has short and long impacts on economic development. Therefore, energy conservation policies can be implemented since energy consumption only has short term effects on economic growth but not long term effects. The result also implies that the US government should encourage the financial sector to develop a new financial policy or system to boost up the process of capitalization to keep going economic growth.