Investigating Factors Affecting Energy Consumption in Iran (with Emphasis on the Financial Development Variable)

For many years, the issue of climate pollution has been seriously addressed and has involved the minds of politicians, statesmen and even the general public. Hence, we decided to study the relationship between energy consumption, financial development, economic growth, energy prices, and urbanization indicators during the 1970- 2016 period by using the Boundary Test Approach and applying it in the Autoregressive Distributed Lag model (ARDL). The estimation results show that the financial development index, economic growth, and urbanization have positive effects, and the oil price has a negative impact on energy consumption in the long-term. Moreover, in the short term, there is a causal relationship between financial development and energy consumption. So the findings suggest that to meet the growing demand for energy and control the environmental pollutions in the country, Policymakers should promote investment in the financial development, until the investment helps to utilize new technology of energy generation.