Does Financial Development Shape the Energy–FDI–Growth Nexus? New Evidence from BRICS+ Countries Using Dynamic Panel Estimation

Geoffrey Gatharia Gachino ()
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Geoffrey Gatharia Gachino: Dubai Business School, University of Dubai, Dubai P.O. Box 14143, United Arab Emirates

IJFS, 2025, vol. 13, issue 3, 1-24

Abstract: This study investigates how energy consumption and foreign direct investment (FDI) influenced economic growth in BRICS+ countries from 1990 to 2021, using a two-step System GMM estimator to address endogeneity and dynamic effects. While the results show that both energy and FDI positively affected growth, disaggregated analysis revealed that renewable energy promoted growth, whereas non-renewables hindered it. Similarly, FDI directed toward gross fixed capital formation (FDI_GFCF) consistently boosted growth, unlike aggregate FDI. Financial development moderated these effects, amplifying the benefits of energy use but dampening FDI’s growth impact in more developed financial systems. The effects of energy and FDI remained stable before and after the Paris Agreement, supporting the robustness of the findings. These results underscore the importance of tailored energy and FDI strategies, financial sector reforms, and supportive policy environments to advance sustainable growth in BRICS+ economies.

Keywords: foreign direct investment; energy consumption; economic growth; BRICS+ economies; financial development; two-step system GMM estimation (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
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