Governance, financial openness, and renewable energy investment in Africa

Isaac Appiah-Otoo, Jeffrey Dankwa Ampah and Xudong Chen

Journal of Policy Modeling, 2025, vol. 47, issue 5, 958-976

Abstract: Sustainable Development Goal 7 stresses the need for countries to expand renewable energy investment since renewable energy addresses global climate change and energy insecurity. However, credit accessibility remains a major obstacle to realising this goal. Financial openness addresses this obstacle; however, empirical evidence on the impact of financial openness on renewable energy investment remains limited. Therefore, this study probes the association between financial openness and renewable energy investment in 18 African countries from 2004 to 2020, focusing on the role of institutional quality. Using the fixed-effects model with Driscoll-Kraay standard errors, the study finds that financial openness is a significant enabler of renewable energy investment in Africa; however, Africa’s weak institutional environment mitigates the positive impact of financial openness on renewable energy investment. The study estimates that Africa must reach a minimum threshold of institutional quality (2.1) on the −2.5–2.5 scale for financial openness to effectively boost renewable energy investment. The study recommends that policymakers enhance the overall institutional framework in Africa for financial openness to effectively drive renewable energy investment.

Keywords: Financial openness; Renewable energy investment; Africa (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:47:y:2025:i:5:p:958-976

DOI: 10.1016/j.jpolmod.2025.05.003

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