Economic Institutions, Political Institutions and Renewable Energy Production in Africa

Abeka, Mac Junior; Amoah, Emmanuel Kwakye; Appiah, Michael Owusu; Gatsi, John Gartchie; Boateng, Ebenezer

doi:10.1080/15228916.2021.1984818

Cited by 10 publications

(6 citation statements)

References 34 publications

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“…Also for the Ethiopian banking industry, Tesfay (2016) found deposit and liquidity as having significant positive nexus with efficiency of commercial banks. Abeka et al (2021) also used data from 41 African economies from 2000 to 2017, and found economic institutions to be relevant in renewable energy production. Agyemang et al (2018) examined the nexus between institutional structures and development of the financial market (ease of access to loans and venture capital availability) in Africa using the two-step generalized method of moments estimator with corrected standard errors.…”

Section: Efficiency Of Financial Institutionsmentioning

confidence: 99%

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Abaidoo

Agyapong²

2022

JFRC

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Purpose This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996). Design/methodology/approach The purpose of this paper is to evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996). Findings The results suggest that institutional quality has significant positive effect on financial institution efficiency, supporting the view that improved and supportive structures of governance tend to promote operational efficiency among financial institutions among economies in SSA. In addition, improvement in individual governance indicators such as corruption control, government effectiveness, regulatory quality and rule of law was also found to support or enhance efficiency of financial institutions among economies in the subregion. Macroeconomic uncertainty on the other hand is found to impede efficiency of financial institutions; the same condition (macroeconomic uncertainty) is further found to negate any positive impact corruption control, government effectiveness, regulatory quality and rule of law have on operational efficiency among financial institutions in the subregion. Originality/value Unlike most of related studies, this study adopts a different approach on the dynamics of financial institutions. Approach pursued in this empirical inquiry examines how the regulatory environment within which financial institutions operate, the form of governance and the quality of government institutions influence efficiency of financial institutions among emerging economies in Sub-Sahara. Empirical analysis conducted examines effects of variables that are unique to this study; these variables are either constructed or econometrically derived specifically for various interactions verified in the study. For instance, institutional quality variable is an index constructed specifically for this study using principal component analysis approach.

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Section: Efficiency Of Financial Institutionsmentioning

confidence: 99%

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Abaidoo

Agyapong²

2022

JFRC

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“…The purpose of this test is to check whether the differentiated error term is second‐order serially correlated. Thus, the Arellano and Bond serial correlation Test (AR2) was employed to test for autocorrelation in the second order (see Abeka et al, 2022; Abeka, Amoah, et al, 2021; Abeka, Andoh, et al, 2021; Obuobi et al, 2022). If the null hypotheses of both tests are not rejected, then the model is consistent.…”

Section: Methodsmentioning

confidence: 99%

“…The results obtained from our empirical analysis have important policy implications. First, it is recommended that the managers of The level of economic freedom in most African countries is generally weak (see Abeka, Amoah, et al, 2021). Therefore, efforts to increase financial inclusion will yield a higher level of financial stability if policies are put in place by policymakers and governments to increase the level of economic freedom.…”

Section: Conclusion and Recommendationsmentioning

confidence: 99%

“…Thus, as different from extant literature, this study examines how two primary forms of economic institutions, namely, financial freedom and business freedom, condition the effect of financial inclusion on financial stability. Abeka, Andoh et al (2021) and Abeka, Amoah, et al (2021) define economic institutions as “the extent to which governments provide protection for privately owned property, build a legal system that treats all equally, ensure evenhanded enforcement of contracts, and a stable monetary environment, keep taxes low, refrain from creating trade barriers, and rely more fully on markets rather than government spending and regulation to allocate resources.” Thus, financial freedom represents an economic institution because it depicts the extent to which banks are efficient and independent from government interference and gruesome regulation (Brkić, 2020). In addition, business freedom could be deemed as an economic institution because it shows the extent to which individuals or corporations can freely run a business and conduct an entrepreneurial activity without government interference and burdensome regulations (Miller & Kim, 2013).…”

Section: Introductionmentioning

confidence: 99%

“…Data from the International Monetary Fund (IMF), the World Bank and the results of a bank survey conducted by the European Investment Bank (EIB) in the year 2018 disclosed that the stability of SSA's financial system is in doubt as nonperforming loans (NPLs) are persistently rising and margins declining (Pelletier & Stijns, 2018). Also, though it has been established that the higher the degree of economic freedom in a society, the higher the level of growth and income, economic freedom has been found consistently to be below average in sub‐Saharan Africa (see Abeka, Amoah, et al, 2021; Zulkhibri et al, 2016). Finally, there has been a steady increase in the level of financial inclusion in sub‐Saharan Africa in the past few years (Sarpong & Nketiah‐Amponsah, 2022).…”

Section: Introductionmentioning

confidence: 99%

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Financial inclusion, economic freedom and financial stability in sub‐Saharan Africa

Frimpong

Yusuf

Boateng

et al. 2023

Thunderbird Intl Bus Rev

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Executive Summary The study examines the role of economic freedom in the relationship between financial inclusion and stability in sub‐Saharan African economies. By employing the System General Method of Moment and data from 39 sub‐Saharan African countries between 2004 and 2017, the study examines whether economic freedom (i.e., financial and business freedom) conditions the effect of financial inclusion on stability. Results from the study show evidence of a positive impact of financial inclusion on financial stability in sub‐Saharan African economies. Again, the results depict that financial inclusion could better enhance financial stability in economies with a high level of economic freedom (i.e., financial and business freedom). The results suggest that policymakers should allow financial institutions to operate with the level of freedom required to provide services at the lowest possible price. Further, it is recommended that policymakers should ensure that administrative requirements are minimal, bureaucracy costs are lesser, and licensing regulations for startups and expansion of existing firms are friendly. With this, associated increases in business and financial freedom would have promising implications for the relationship between financial inclusion and stability. Managerial Implications of the Study This research is very vital for firms in both the financial and nonfinancial. Specifically, managers of firms in the financial sector can embrace the level of financial freedom that would be allowed by the government, to come up with new and inclusive financial products, while putting in measures not to endanger the stability of the financial sector. Managers in the business sector could also take advantage of the business freedom that would be allowed by the government to diversify business operations, increase profitability and avoid causing nonperforming loan problems to banks. Originality/Value The study provides the first insight into how economic institutions condition the effect of financial inclusion on financial stability, which has not been previously studied.

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Do institutional quality and its threshold matter in the sensitivity of the renewable energy transition to financial development? New empirical perspectives

Olaniyi,

Al‐Faryan,

Ogbaro

2023

Int. J Fin Econ

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The transition to renewable energy is critical for environmental sustainability, consistent with sustainable development goals (SDGs) 7, 8, 11, 12, and 13 of the United Nations Development Programme (UNDP). Scholars have identified financial development and institutional quality as significant factors determining the renewable energy transition in developing countries. This study opines that the efficiency of the financial system in supporting and providing the substantial financial implications that a switch to renewable energy necessitates depends on the quality of the institutional framework. Weak institutions in developing countries produce loopholes and inherent flaws in the financial system that facilitate corruption and opportunism, ultimately promoting dirty energy usage and technology at the expense of renewable energy. This process suggests that the interaction between financial development and institutions can either accelerate or impede the transition to renewable energy, depending on an economy's institutional architecture. Considering Africa's enormous renewable energy resources, previous research has overlooked the implications of the interplay between institutional quality and financial development in spurring Africa's transition to renewable energy. Thus, this study looks at the role of institutions in moderating the relationship between financial development and renewable energy in Africa from 1990 to 2019, using first‐ and second‐generation estimators to capture econometrics' pitfalls such as endogeneity, cross‐sectional dependence, and heterogeneity inherent in the panel dataset. This study departs from previous research in that it uses a dynamic panel threshold to determine the threshold of institutions beyond which financial development is stimulated to spur Africa's transition to renewable energy. The findings show that institutions create loopholes that allow rent‐seeking, opportunism, and sharp practices in the African financial system. These inherent flaws divert financial resources to support dirty energy and undermine the financial sector's ability to support a renewable energy transition on the continent. Also, the findings from the threshold of institutions affirm that African countries operate predominantly below the threshold of institutions, over which institutions enable financial development to expedite the continent's transition to renewable energy. The study suggests that institutional quality is essential in the relationship between financial development and Africa's shift to renewable energy. The findings' policy implications are discussed and outlined.

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Economic Institutions, Political Institutions and Renewable Energy Production in Africa

Cited by 10 publications

References 34 publications

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Financial inclusion, economic freedom and financial stability in sub‐Saharan Africa

Do institutional quality and its threshold matter in the sensitivity of the renewable energy transition to financial development? New empirical perspectives

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