Study the Nexus between Development and Financial Risk and Agricultural Energy Demand

Subject Areas : Optimal use of natural resources

Mohammad Amiri ¹ , Seyednematollah Moosavi ² , Reza Moghaddasi ³

1 - PhD Student in Agricultural Economics, Islamic Azad University, Marvdasht Branch, Marvdasht, Iran
2 - Associate Professor, Department of Agricultural Economics, Islamic Azad University, Marvdasht Branch, Marvdasht, Iran.
3 - Associate Professor, Department of Agricultural Economics, Extension and Education, Science and Research Branch, Islamic Azad University, Tehran, Iran

Received: 2025-03-02 Accepted : 2025-04-06 Published : 2025-06-21

Keywords: Agriculture, Energy Consumption, Financial Development, Smooth Transition Regression.,

Abstract :

Objective: Financial development facilitates farmers' access to credit resources, enabling the adoption of innovative technologies for energy management. On the other hand, long-term planning for agricultural businesses is expected to reduce various types of risks, including financial risk, thus promoting production. The aim of this study is to empirically investigate the relationship between development and financial risk with energy consumption in the agricultural sector in Iran and selected developing countries.

Material and methods: For this purpose, financial development indicators such as the ratio of deposits and bank facilities to agricultural value-added, as well as economic, financial, and political risk indicators, have been used for two groups of oil-exporting and non-oil-exporting developing countries during the years 2010 to 2020. In order to analyze the data, the Smooth Transition Regression model was used, which allows for examining non-linear relationships between variables.

Results: The findings suggest significant differences in the average per capita agricultural energy consumption between the studied oil-exporting and non-oil-exporting countries. Other research results indicate the superiority of non-linear specification relationships between variables and their threshold behavior.

Conclusion: Financial development has an inverse effect on per capita energy consumption, and an increase in various types of risk (financial, economic, and political) is associated with an increase in per capita energy consumption in the agricultural sector. The magnitude of the impact of variables in non-oil-exporting countries is generally estimated to be higher than in oil-exporting countries.

References:

Abdolahi, M. (2008) Investing in financial market challenges in the agricultural sector of Jihad Keshavzi database. Process. Volume 16, No. 49. (In Farsi).
Ahangari, A. Kamranpour, S. (2016). The effect of financial development and added value on energy consumption in industrial and agricultural sectors of Iran. Quarterly Journal of Applied Economic Studies of Iran. Volume 5, No. 19, pp. 269-286. (In Farsi).
Ansari, Y. Hosseini Yakani, A. (2013) The effect of the development of financial markets on the development of the agricultural sector in Kohgiluyeh and Boyer Ahmad provinces. Economic research and agricultural development of Iran. No. 3145, pp. 529-535. (In Farsi).
Girma, S., Shortland, A., (2008). The political economy of financial
development. Oxf. Econ. Pap. 60, 567–596.
Chang, S. C. (2015). “Effects of financial developments and income on energy consumption”. Interational Review of Economics & Finance, Vol. 35, PP. 28-44
Hayakawa, K., Kimura, F., & Lee, H. H., (2019), "How does country risk matter for foreign direct investment? ", The Developing Economies, No. 51(1).
Minier, J., (2009). Opening a stock exchange. J. Dev. Econ. 90 (1355-143).
Ordi bazar, H. and Moghaddasi, R. (2010). Iidentifying the Causes of Agricultural Price Gap Fluctuations (For Beef & Veal, Poultry). Journal of Agricultural Economics Research, 4, 27-44.(In Farsi).
Rai, Reza, Fazelian, Seyed Mohsen, (1391). "Investigating and providing a model of the relationship between country risk and attracting foreign investment in developing countries (with an emphasis on the Islamic Republic of Iran)", Strategic Management Thought (Management Thought). Number 2 (consecutive 12). (In Farsi).
Shahabadi, Abolfazl and Mahmoudi, Abdullah; (2006). "Determinants of foreign direct investment in Iran", Journal of economic inquiries, number 5.(In Farsi).
Shahbazi, K. and Saeedpour, L. (2012). The effect of financial development thresholds on economic gro Shahbaz, M., Shahbaz Shabbir, M., & Sabihuddin Butt, M. (2013). Effect of financial development on agricultural growth in Pakistan: New extensions from bounds test to level relationships and Granger causality tests. International Journal of Social Economics,.wth in eight countries. Economic growth and development research. 3(12), 21-38.
Shahbaz, M., Lean, H.H., (2012)b. Does financial development increase energy consumption? The role of industrialization and urbanization in Tunisia. Energy Policy 40, 473–479.
Tayibi, Seyed Kamil; Pour Shahabi, Farshid; Khanizadeh Amiri, Mojtaba and Kazemi, Elham; (2012). The effect of foreign direct investment and the degree of trade openness on domestic investment and economic growth", Economic Research and Policy Quarterly, , No. 67 15.(In Farsi).
Vijaykumar, j., Rasheed, A., & Tondkar, R. (2018). country risk and foreign Direct Investment. an empirical investigation multinational business review, 17, 187-2.
Sadorsky, P. (2010). “The impact of financial development on energy consumption in emerging economies”. Energy Policy, Vol. 38(5), PP. 2528-253500.