Sustainable Energy and Financial Stability in European OECD Countries: An Analysis Based on GMM Dynamic Panel Estimation

Achmakou Lahoucine, Roubyou Said () and Ouakil Hicham
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Achmakou Lahoucine: Laboratory of Applied Studies and Research in Economic Sciences, Ibn Zohr University, Agadir 80000, Morocco
Roubyou Said: Laboratory of Economics, Finance, Management and Innovation, University Ibn Tofail, Kenitra 14000, Morocco
Ouakil Hicham: Laboratory of Economics, Finance, Management and Innovation, University Ibn Tofail, Kenitra 14000, Morocco

Sustainability, 2025, vol. 17, issue 22, 1-18

Abstract: This study explores the effect of the energy transition on financial stability in the context of 13 OECD countries during the period from 2009 to 2019. In this sense, the soundness of the financial system is expressed through two dimensions: the Zscore and the volume of non-performing loans (NPLs). Using a dynamic panel estimation with the Generalized Method of Moments (GMM), the results highlight the complex effects of the energy transition on financial stability. Switching from fossil to clean energy improves the Zscore and reduces NPLs. In addition, the study reveals heterogeneous impacts depending on the renewable energy source involved. In fact, wind energy makes a positive contribution to both dimensions of financial stability. By linking the dynamics of the energy transition with the resilience of the banking sector, this study provides new insights into how sustainable energy policies can foster long-term financial sustainability. The effects of solar power and hydroelectricity, while positive overall, are not without nuances. Specifically, the former reduces the NPLs but also the Zscore, while the latter has the opposite effect on both aspects of financial stability. At this point, it is crucial to take into account the varying effects of different renewable energy sources when assessing the financial repercussions of the energy transition.

Keywords: energy transition; clean energy; financial stability; NPLs; Zscore; GMM system (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:22:p:10032-:d:1791351

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