Recent economic growth theories draw devotion toward endogenous technological change, which describes the growth patterns of world economies. Romer (1986) established an endogenous growth model in which technological innovation was formed in the research and development (R&D) areas including human capital and the existing knowledge stock. Then, it was used in the production of all final goods and led to permanent rises in the output growth rate.Innovation is a significant factor of economic growth in the mind of various experts especially the policy makers. Moreover, innovation is not directly related to the amount of productive resources; therefore, it affects growth of the economy mostly through TFP. Technological innovation and non-technological factors are two main divisions of innovation, where new production and services are related to the technological innovation and non-technological innovations in the form of organizational or marketing modifications. However, growth level in itself can be attained by putting more inputs for process of production and through attaining higher levels of output with the same quantity of

Even though a number of studies have attempted to determine the relationship between energy consumption and economic growth role of financial development has not been considered for efficient energy consumption. At present Pakistan is coping with a serious energy problem. This paper attempts to determine the nature of relationship between energy consumption, financial development and economic growth in Pakistan for the period 1980-2009 by employing co-integration and error correction techniques, finally Granger causality test is used to determine the direction of causality between financial development and energy consumption. The results indicate that financial development can be used as a useful measure to overcome energy problems by achieving efficiency in energy use.

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