Does financialization enhance renewable energy development in Sub-Saharan African countries?

Abstract

This study examines the influence of financial development, fiscal policy, and foreign capital on renewable energy development in 21 Sub-Saharan African nations from 2000 to 2021. The aim is to address the dearth of information on how the financial sector affects renewable energy. Using panel data and the Panel Quantile Autoregressive Distributed Lag (PQARDL) technique, we analyze the short- and long-term impacts of these factors while considering industrialization and institution quality. Our findings indicate that financial development and fiscal policy pose significant obstacles to renewable energy development across all quantile distributions in the long run. However, foreign capital positively contributes to renewable energy development across most quantiles, except the 70th quantile. We also observe a declining trend in Sub-Saharan Africa's share of renewable development due to industrialization and institutional quality in the long term. Furthermore, the interactive roles of fiscal policy and institutional quality hinder renewable advancement in the region over time. These empirical outcomes provide valuable insights on how to attract foreign capital and allocate investments in renewable development. By doing so, we can offer consumers cost-competitive choices and strive towards extending high-value-added facilities within a sustainable environment.