jepr İktisat Politikası Araştırmaları Dergisi 2148-3876 Istanbul University 10.26650/JEPR1704553 Macroeconomics (Other) Makro İktisat (Diğer) Electricity Prices, Technology, Productivity, And Environmental Degradation: Implications For Financial Stability https://orcid.org/0000-0001-7878-5192 Çakır Mehmet Ali GUMUSHANE UNIVERSITY https://orcid.org/0000-0002-9753-9621 Ökte Mehmet Kutluğhan Savaş ISTANBUL UNIVERSITY 02 19 2026 13 1 129 145 05 23 2025 12 31 2025 Copyright © 2014, Journal of Economic Policy Researches 2014 Journal of Economic Policy Researches

The limited availability of fossil fuels and the financial pressure they create for countries that do not have the resources have led countries to search for new energy sources. In particular, renewable energy sources and therefore electrical energy obtained from these sources have been proposed in the literature as an alternative to fossil fuels. Thus, this study investigates the impact of electricity prices on financial stability in European Union countries from 2010 to 2021 using Driscoll Kraay fixed effects estimation. Financial stability is measured using the bank z-score, while productivity-intensive technology, environmental quality, and economic growth are included as control variables. The findings indicate that an increase in electricity prices negatively affects the bank z-score. In contrast, productivity-intensive technology positively impacts the bank z-score. Similarly, environmental quality contributes to an increase in the bank z-score. Additionally, economic growth enhances financial stability. Considering that rising electricity prices negatively affect financial stability, policymakers should encourage companies to produce electricity from renewable sources, such as solar panels or wind turbines. This can be supported through incentives such as tax breaks or low-cost financing for firms investing in on-site renewable energy systems. In this way, electricity price fluctuations will have less impact on companies and, in turn, help protect financial stability.

 Financial Stability Electricity Prices Productivity Intensive Technology Bank z-score Economic Growth Alamgir, F., & Amin, S. B. (2021). The nexus between oil price and stock market: Evidence from South Asia. Energy Reports, 7, 693–703. https://doi.org/10.1016/j.egyr.2021.01.027 google scholar Ang, T.-Z., Salem, M., Kamarol, M., Das, H. S., Nazari, M. A., & Prabaharan, N. (2022). A comprehensive study of renewable energy sources: Classifications, challenges and suggestions. Energy Strategy Reviews, 43, 100939. doi: 10.1016/j.esr.2022.100939 google scholar B., A., & Paul, S. (2021). Oil shocks and stock market: Revisiting the dynamics. Energy Economics, 96, 105111. doi: 10.1016/j.eneco.2021.105111 google scholar Bahrini, R., & Qaffas, A. A. (2019). Impact of Information and Communication Technology on Economic Growth: Evidence from Developing Countries. Economies, 7(1), 21. https://doi.org/10.3390/economies7010021 google scholar Baltagi, B. H., & Wu, P. X. (1999). Unequally Spaced Panel Data Regressions with AR(1) Disturbances. Econometric Theory, 15(6), 814–823. google scholar Bayar, Y., Borozan, D., & Gavriletea, M. D. (2021). Banking sector stability and economic growth in post‐transition European Union countries. International Journal of Finance & Economics, 26(1), 949–961. https://doi.org/10.1002/ijfe.1829 google scholar Bayraktar, Y., Aydin, S., Çakır, M. A., Recepoğlu, M., Ozyilmaz, A., Buyukakin, F., & Çakır, S. (2024). Consequences of Information and Communication Technologies and Environmental Degradation on Health Expenditure. INQUIRY: The Journal of Health Care Organization, Provision, and Financing, 61, 00469580241277449. https://doi.org/10.1177/00469580241277449. google scholar Bernanke, B. S., Gertler, M., Watson, M., Sims, C. A., & Friedman, B. M. (1997). Systematic Monetary Policy and the Effects of Oil Price Shocks. Brookings Papers on Economic Activity, 1997(1), 91. https://doi.org/10.2307/2534702 google scholar Bhargava, A., Franzini, L., & Narendranathan, W. (1982). Serial Correlation and the Fixed Effects Model. The Review of Economic Studies, 49(4), 533–549. https://doi.org/10.2307/2297285 google scholar Breusch, T. S., & Pagan, A. R. (1980). The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of Economic Studies, 47(1), 239. https://doi.org/10.2307/2297111 google scholar Chiaramonte, L., Liu, F. Hong, Poli, F., & Zhou, M. (2016). How Accurately Can Z‐score Predict Bank Failure? Financial Markets, Institutions & Instruments, 25(5), 333–360. https://doi.org/10.1111/fmii.12077 google scholar Chien, F., Sadiq, M., Kamran, H. W., Nawaz, M. A., Hussain, M. S., & Raza, M. (2021). Co-movement of energy prices and stock market return: Environmental wavelet nexus of COVID-19 pandemic from the USA, Europe, and China. Environmental Science and Pollution Research, 28(25), 32359–32373. doi: 10.1007/s11356-021-12938-2 google scholar Cuestas, J. C., Monfort, M., & Ordóñez, J. (2024). Gas price shocks, the current account, and the real exchange rate: An empirical analysis for the EU. Finance Research Letters, 60, 104840. doi: 10.1016/j.frl.2023.104840 google scholar Cuñado, J., & Pérez De Gracia, F. (2003). Do oil price shocks matter? Evidence for some European countries. Energy Economics, 25(2), 137–154. doi: 10.1016/S0140-9883(02)00099-3 google scholar Danisman, G. O., & Tarazi, A. (2020). Financial inclusion and bank stability: Evidence from Europe. The European Journal of Finance, 26(18), 1842–1855. doi: 10.1080/1351847X.2020.1782958 google scholar Dave, P., Wadhwa, V., Aggarwal, S., & Seetharaman, A. (2013). The Impact of Research and Development on the Financial Sustainability of Information Technology (IT) Companies Listed on the S&P 500 Index. Journal of Sustainable Development, 6(11), p122. doi: 10.5539/jsd.v6n11p122 google scholar Demirer, R., Ferrer, R., & Shahzad, S. J. H. (2020). Oil price shocks, global financial markets and their connectedness. Energy Economics, 88, 104771. doi: 10.1016/j.eneco.2020.104771 google scholar Doruk, Ö. T. (2024). The link between electricity consumption and stock market during the pandemic in Türkiye: A novel high-frequency approach. Environmental Science and Pollution Research, 31(11), 17311–17323. https://doi.org/10.1007/s11356-024-32155-x google scholar Driscoll J., & Kraay A. (1998). Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data. The Review of Economics and Statistics, 80(4), 549–560. google scholar Emara, N., & El Said, A. (2021). Financial inclusion and economic growth: The role of governance in selected MENA countries. International Review of Economics & Finance, 75, 34–54. doi: 10.1016/j.iref.2021.03.014 google scholar European Central Bank. (2022). Financial Stability Review. https://www.ecb.europa.eu/pub/pdf/fsr/ecb.fsr202211~6383d08c21.pl.pdf google scholar European Commission. Directorate General for Energy., Trinomics., Schoenherr., Fraunhofer ISI., & Enerdata. (2024). Study on mapping of regulatory frameworks and barriers for individual and collective renewables self-consumption in EU Member States. Publications Office. https://data.europa.eu/doi/10.2833/172166 google scholar European Commission. Statistical Office of the European Union. (2023). Sustainable development in the European Union: Statistical annex to the EU voluntary review : 2023 edition. Publications Office. https://data.europa.eu/doi/10.2785/97840 google scholar European Commission. Statistical Office of the European Union. (2024). Renewables take the lead in power generation in 2023. https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20240627-1 google scholar Evgenidis, A. (2018). Do all oil price shocks have the same impact? Evidence from the euro area. Finance Research Letters, 26, 150–155. doi: 10.1016/j.frl.2017.12.013 google scholar Gramlich, E. M. (1979). Macro Policy Responses to Price Shocks. Brookings Papers on Economic Activity, 1979(1), 125. https://doi.org/10.2307/2534306. google scholar Hadri, K., & Kurozumi, E. (2012). A simple panel stationarity test in the presence of serial correlation and a common factor. Economics Letters, 115(1), 31–34. https://doi.org/10.1016/j.econlet.2011.11.036 google scholar Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251–1271. https://doi.org/10.2307/1913827 google scholar Herman, R., Nistor, C., & Jula, N. M. (2023). The Influence of the Increase in Energy Prices on the Profitability of Companies in the European Union. Sustainability, 15(21), 15404. doi: 10.3390/su152115404 google scholar Herrera, A. M., Karaki, M. B., & Rangaraju, S. K. (2019). Oil price shocks and U.S. economic activity. Energy Policy, 129, 89–99. https://doi.org/10.1016/j.enpol.2019.02.011 google scholar Holman, R., & Lefort, J. S. (2024). Invested in renewables. The Only Way Forward. https://www.eib.org/en/essays/europe-energy-transition-renewable google scholar Horobet, A., Vrinceanu, G., Popescu, C., & Belascu, L. (2019). Oil Price and Stock Prices of EU Financial Companies: Evidence from Panel Data Modeling. Energies, 12(21), 4072. https://doi.org/10.3390/en12214072 google scholar IEA. (2023). World Energy Outlook 2023. IEA. https://www.iea.org/reports/world-energy-outlook-2023 google scholar Ijaz, S., Hassan, A., Tarazi, A., & Fraz, A. (2020). LINKING BANK COMPETITION, FINANCIAL STABILITY, AND ECONOMIC GROWTH. Journal of Business Economics and Management, 21(1), 200–221. https://doi.org/10.3846/jbem.2020.11761 google scholar Jarrett, U., Mohaddes, K., & Mohtadi, H. (2019). Oil price volatility, financial institutions and economic growth. Energy Policy, 126, 131–144. https://doi.org/10.1016/j.enpol.2018.10.068 google scholar Jima, M. D., & Makoni, P. L. (2023). Causality between Financial Inclusion, Financial Stability and Economic Growth in Sub-Saharan Africa. Sustainability, 15(2), 1152. https://doi.org/10.3390/su15021152 google scholar Khan, M., & Yoon, S.-M. (2021). Financial instability and environmental degradation: A panel data investigation. Applied Economics, 53(54), 6319–6331. doi: 10.1080/00036846.2021.1937508 google scholar Khan, S., Akbar, A., Nasim, I., Hedvičáková, M., & Bashir, F. (2022). Green finance development and environmental sustainability: A panel data analysis. Frontiers in Environmental Science, 10, 1039705. https://doi.org/10.3389/fenvs.2022.1039705 google scholar Labandeira, X., Labeaga, J. M., & López-Otero, X. (2017). A meta-analysis on the price elasticity of energy demand. Energy Policy, 102, 549–568. https://doi.org/10.1016/j.enpol.2017.01.002 google scholar Lee, C.C., & Lee, C.C. (2022). How does green finance affect green total factor productivity? Evidence from China. Energy Economics, 107, 105863. doi: 10.1016/j.eneco.2022.105863 google scholar Li, Y., & Solaymani, S. (2021). Energy consumption, technology innovation and economic growth nexuses in Malaysian. Energy, 232, 121040. https://doi.org/10.1016/j.energy.2021.121040 google scholar Magazzino, C., Shahbaz, M., & Adamo, M. (2023). On the relationship between oil market and European stock returns. Environmental Science and Pollution Research, 30(59), 123452–123465. doi: 10.1007/s11356-023-31049-8. google scholar Minsky, H. P. (1992). The Financial Instability Hypothesis. The Jerome Levy Economics Institute of Bard College. https://www.levyinstitute.org/wp-content/uploads/2024/02/wp74.pdf google scholar Nadeem, M. A., Jiao, Z., Nawaz, K., & Younis, A. (2020). Impacts of Voice and Accountability upon Innovation in Pakistan: Evidence from ARDL and Maki Cointegration Approaches. Mathematical Problems in Engineering, 2020, 1–18. https://doi.org/10.1155/2020/6540837 google scholar Olayungbo, D. O., Zhuparova, A., Al-Faryan, M. A. S., & Ojo, M. S. (2024). Global oil price and stock markets in oil exporting and European countries: Evidence during the Covid-19 and the Russia-Ukraine war. Research in Globalization, 8, 100199. doi: 10.1016/j.resglo.2024.100199 google scholar Paramati, S. R., Shahzad, U., & Doğan, B. (2022). The role of environmental technology for energy demand and energy efficiency: Evidence from OECD countries. Renewable and Sustainable Energy Reviews, 153, 111735. doi: 10.1016/j.rser.2021.111735 google scholar Pesaran, M. H. (2004). General Diagnostic Tests for Cross Section Dependence in Panels. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.572504 google scholar Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of Applied Econometrics, 22(2), 265–312. https://doi.org/10.1002/jae.951 google scholar Sahay, R., Eriksson von Allmen, U., Lahrèche-Révil, A., Khera, P., Ogawa, S., Bazarbash, M., & Beaton, K. (2020). The promise of Fintech: Financial inclusion in the post COVID-19 era. International Monetary Fund. google scholar Saif-Alyousfi, A. Y. H., Saha, A., Md-Rus, R., & Taufil-Mohd, K. N. (2021). Do oil and gas price shocks have an impact on bank performance? Journal of Commodity Markets, 22, 100147. https://doi.org/10.1016/j.jcomm.2020.100147 google scholar Schwartz, A. J. (1995). Why Financial Stability Despends on Price Stability. Economic Affairs, 15(4), 21–25. doi: 10.1111/j.1468-0270.1995.tb00493.x google scholar Shi, X., & Shen, Y. (2021). Macroeconomic uncertainty and natural gas prices: Revisiting the Asian Premium. Energy Economics, 94, 105081. doi: 10.1016/j.eneco.2020.105081 google scholar Toader, E., Firtescu, B. N., Roman, A., Anton, S. G. (2018). Impact of Information and Communication Technology Infrastructure on Economic Growth: An Empirical Assessment for the EU Countries. Sustainability, 10(10), 3750. doi: 10.3390/su10103750 google scholar Topalcık, O., & Kirikkaleli, D. (2024). Financial stability and environment degradation in Turkey: Evidence from fourier ARDL approach. Frontiers in Environmental Science, 12, 1420019. doi: 10.3389/fenvs.2024.1420019 google scholar UN. (1974). WORLD ECONOMIC SURVEY, 1973, Part Two. Current Economic Developments. https://www.un.org/en/development/desa/policy/wess/wess_archive/1973wes_part2.pdf google scholar UNCTAD (Ed.). (2023). Technology and Innovation Report 2023 Opening Green Windows: Technological Opportunities for a Low-carbon World. United Nations. google scholar Westerlund J., & Edgerton D. L. (2007). A panel bootstrap cointegration test. Economics Letters, 97(3), 185–190. https://doi.org/10.1016/j.econlet.2007.03.003 google scholar Xu, X. L., Shen, T., Zhang, X., & Chen, H. H. (2020). The role of innovation investment and executive incentive on financial sustainability in tech-capital-labor intensive energy company: Moderate effect. Energy Reports, 6, 2667–2675. https://doi.org/10.1016/j.egyr.2020.09.011 google scholar Yerdelen Tatoğlu, F. (2016) Panel Veri Ekonometrisi. Beta Yayınları. google scholar Zhen, Z., Ullah, S., Shaowen, Z., & Irfan, M. (2023). How do renewable energy consumption, financial development, and technical efficiency change cause ecological sustainability in European Union countries? Energy & Environment, 34(7), 2478–2496. https://doi.org/10.1177/0958305X221109949. google scholar