Nexus between economic growth, financial development, and energy consumption in Sub‐Saharan African countries: A dynamic approach

Abdoulganiour Almame Tinta, Salifou Ouedraogo and Noel Thiombiano

Natural Resources Forum, 2021, vol. 45, issue 4, 366-379

Abstract: This study investigates the nexus between economic growth, financial development, and renewable energy consumption in Sub‐Saharan African countries. Using a dynamic approach and seemingly unrelated regressions (SUR) from 48 countries over the period 2000–2019, the findings show that financial development, government expenditures, capital, international trade, education, and the quality of governance have positive impacts on economic growth while inflation has a negative effect. In the long run, energy consumption and foreign direct investments increase economic growth only in high income and upper middle‐income countries (HI‐UMIC). In contrast, in lower middle‐income countries (LMIC) and low income countries (LIC), the cost of transforming renewable energies is a burden for growth. This reverse effect on growth in LMIC and LIC is amplified by natural resource dependence and foreign direct investments (FDI) volatility. Furthermore, renewable energy consumption is driven by financial development, growth, urbanization, foreign direct investment, education, and the quality of governance via scale effect. From the results, new insights for policymakers such as fiscal policies, trade‐led growth policies, and monetary policies, are provided to support the renewable energy sector, enhance financial development and economic growth.

Date: 2021
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https://doi.org/10.1111/1477-8947.12240

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Persistent link: https://EconPapers.repec.org/RePEc:wly:natres:v:45:y:2021:i:4:p:366-379

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