Background and Motivation
As global efforts intensify toward sustainable economic growth and clean energy transition, the interplay between energy diversification, financial development, and per-capita income in advanced economies has gained critical importance. OECD countries, often seen as leaders in technology, finance, and environmental governance, present an ideal laboratory for examining whether these factors are converging or diverging in a globalised world. The longstanding theory of convergence suggests that lagging economies will catch up to wealthier peers, but do these patterns hold for energy and finance, especially amidst climate and technological shifts? China Finance Review International (CFRI) brings you a new article titled “ Energy diversification, financial development and economic development: an examination of convergence in OECD countries ”, which investigates these very questions using advanced econometric methods and panel data from 1997 to 2021.
Methodology and Scope
The study employs a combination of club convergence tests, Granger causality tests, and panel regressions to analyse the evolution and interrelationships of energy diversification, financial development, and per-capita income among 38 OECD countries over a 25-year period. By leveraging the Phillips and Sul log-t test, the authors identify whether all countries are converging to a single steady state or instead forming distinct “convergence clubs”—groups of countries with similar development paths. Granger causality and regression analyses are used to uncover the drivers and directionality of relationships between the three variables, with careful control for technological progress, capital formation, labour participation, trade, oil prices, and human development.
Key Findings and Contributions
Why It Matters
The research provides critical insights for countries seeking to accelerate their transition to cleaner energy, deepen financial development, and enhance economic prosperity. As climate change and energy security become central to the global agenda, understanding why certain nations cluster together and what drives progress is crucial for targeted, effective policymaking. The emergence of convergence clubs suggests that global “one-size-fits-all” solutions may be less effective than tailored approaches that account for country-specific trajectories, resources, and institutional strengths.
Practical Applications
Discover high-quality academic insights in finance from this article published in China Finance Review International . Click the DOI below to read the full-text original! Open access for a limited time!
China Finance Review International
News article
Energy diversification, financial development and economic development: an examination of convergence in OECD countries
5-Jun-2025