Financialization and Its Influence on Energy Transition: The Role of Service Sector Growth and Infrastructure Investments in Developing Economies

Bright Gyamfi (), Ashutosh Yadav (), Divine Agozie (), Nitish Kumar () and Simplice Asongu
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Bright Gyamfi: Selangor, MALAYSIA
Divine Agozie: Accra, Ghana
Nitish Kumar: Ranchi, India

No 26/062, Working Papers from European Xtramile Centre of African Studies (EXCAS)

Abstract: This study examines the potential links between financialization (environmental tax (TX), foreign direct investment (FDI), and financial development index(FD)) and energy transition (ET) while accounting for service value-added (SV), infrastructure development (INF), and gross capital formation (INV) in 39 developing economies from 2000 to 2021. It uses the Two-step difference Generalized Method of Moments (GMM) and Panel Quantile regressions. The result of financialization in energy transition reveals a mix of outcomes; TX has a positive connection with ET while FD has a negative connection with ET for all the models. On the other hand, outcomes from FDI indicate a positive and significant connection with the ET for Models 1, 2, and 4, while Models 3 and 5 show a negative significant connection with energy transition. Regarding interaction terms, FDI*INF has a positively significant connection with ET, while TX*INF has a negatively significant connection with ET. These results culminate in the formulation of policy guidelines orientated toward SDGs, precisely the strategic policy for addressing SDG-7 and SDG-13. The study advocates that the sampled countries undertake measures to expedite the ET process by enhancing instructional development and investment while instituting an effective environmental taxation regime.

Keywords: Energy Transition; Environmental Tax; Financial Development; FDI; Development Economies (search for similar items in EconPapers)
Pages: 34 pages
Date: 2026-01
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Working Paper: Financialization and Its Influence on Energy Transition: The Role of Service Sector Growth and Infrastructure Investments in Developing Economies (2026)
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