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on Financial Development and Growth |
| By: | Steenbrink, Rachel; Skali, Ahmed |
| Abstract: | Although it is often argued that wealth inequality matters more for economic growth than income inequality, this relationship has rarely been studied empirically, with a few exceptions covering a very restricted country sample or short timeframe. Leveraging hitherto unexploited wealth inequality data from the World Inequality Database, covering a panel of 165 countries between 1995 and 2019, we document a negative and statistically significant relationship between wealth concentration at the top of the distribution and economic growth. A one standard deviation increase in wealth inequality within countries is associated with a 0.4 percentage points (17%) decline in growth rates. Instrumental variables support a causal interpretation of the results. The results survive a large battery of robustness checks, and we find little evidence to suggest a heterogeneous relationship. |
| Keywords: | Wealth Inequality, Economic Growth, Economic Development |
| JEL: | D31 D63 O10 O47 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1417&r=fdg |
| By: | Mathias Krogh (Aarhus University); Giovanni Pellegrino (University of Padova and Aarhus University) |
| Abstract: | We extend a state-of-the-art DSGE model to include short- and long-term uncertainty shocks that differ in terms of persistence. Considering the two shocks is essential for capturing the imperfect empirical relationship between short- and long-term financial uncertainty as proxied by the VIX. Leveraging the model’s implications about the VIX term structure, we suggest a theory-informed, nonrecursive identification strategy to separately identify the macroeconomic effects of the two shocks in a structural VAR. In line with the DSGE model, long-term uncertainty shocks have stronger and more persistent real effects than short-term shocks. Moreover, they explain a substantial fraction of the forecast error variance in unemployment and the policy rate at horizons greater than two years. In a supplementary analysis of uncertainty news shocks, we show that news about higher uncertainty in the future is recessionary. |
| Keywords: | uncertainty shocks, medium-scale DSGE model, structural VAR, nonrecursive identification, VIX term structure. |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0310&r=fdg |
| By: | Mr. Adrian Alter; Bashar Hlayhel; Thomas Kroen; Thomas Piontek |
| Abstract: | This paper assesses the state and resilience of corporate and banking sectors in the Middle East and North Africa (MENA) in a “higher-for-longer” interest rate environment using granular micro data to conduct the first cross-country corporate and banking sector stress tests for the MENA region. The results suggest that corporate sector debt at risk may increase sizably from 12 to 30 percent of total corporate debt. Banking systems would be broadly resilient in an adverse scenario featuring higher interest rates, corporate sector stress, and rising liquidity pressures with Tier-1 capital ratios declining by 2.3 percentage points in the Gulf Cooperation Council (GCC) countries and 4.0 percentage points in non-GCC MENA countries. In the cross-section of banks, there are pockets of vulnerabilities as banks with higher ex-ante vulnerabilities and state-owned banks suffer greater losses. While manageable, the capital losses in the adverse scenario could limit lending and adversely impact growth. |
| Keywords: | Bank capital; stress testing; financial stability; zombie credit |
| Date: | 2024–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/080&r=fdg |
| By: | Serena Merrino; Ilias Chondrogiannis |
| Abstract: | We examine the effect of post-2010 banking regulation in South Africa on financial stability, macroeconomic variables and bank performance. We focus on risk spillovers and increased network and tail connectedness between banks, using a sample of nine listed South African banks in 20082023. The implementation of Basel III regulation, particularly capital adequacy ratios, has reduced connectedness-related risks but there is weak evidence of an effect of regulation on bank performance. |
| Date: | 2024–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:wpaper:11060&r=fdg |
| By: | Tendai Gwatidzo; Witness Simbanegavi |
| Abstract: | Using survey data from the World Banks Global Findex Database and a pseudo panel we investigate two pertinent issues pertaining to financial inclusion in South Africa. First, we consider the factors driving the likelihood of accessing financial services in South Africa. Second, we investigate the impact of banking sector competition on financial inclusion in South Africa essentially testing the information and market power hypotheses. Household head characteristics such as age, education and income are found to positively influence the likelihood of being financially included. Considering the relationship between financial inclusion and banking sector competition, evidence supports the information hypothesis rather than the market power hypothesis. That is, lower bank competition facilitates the formation of longer-lasting relationships between banks and their clients, which incentivises banks to invest in information generation and monitoring in previously unserved markets, thereby expanding financial inclusion. |
| Date: | 2024–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:wpaper:11061&r=fdg |
| By: | Luciana Juvenal; Ivan Petrella |
| Abstract: | We examine the impact of commodity price changes on the business cycles and capital flows in emerging markets and developing economies (EMDEs), distinguishing between their role as a source of shock and as a channel of transmission of global shocks. Our findings reveal that surges in export prices, triggered by commodity price shocks, boost domestic GDP, an effect further amplified by the endogenous decline of country spreads. However, the effects on capital flows appear muted. Shifts in U.S. monetary policy and global risk appetite drive the global financial cycle in EMDEs. Eased global credit conditions, attributed to looser U.S. monetary policy or lower global risk appetite, lead to a rise in export prices, higher output, a decrease in government borrowing costs, and stimulate greater capital flows. The endogenous response of export prices amplifies the output effects of a more accommodative U.S. monetary policy while country spreads magnify the impact of shifts in global risk appetite. |
| Date: | 2024–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/082&r=fdg |
| By: | Shangshang Li |
| Abstract: | This paper evaluates gains from international monetary policy cooperation between the financial centre and periphery countries in a two-country open economy model consistent with global financial cycles. Compared to the non-cooperative Nash equilibrium, the optimal cooperative equilibrium robustly fails to benefit both countries simultaneously. The financial periphery is more likely to gain from cooperation if it raises less foreign currency debt or is relatively small. These results also hold when considering the transitional gains and losses of moving from non-cooperation to cooperation. The uneven distribution of gains from cooperation persists when both countries adopt implementable policy rules with and without cooperation. Nevertheless, both countries gain when transitioning from the Nash to the cooperative implementable rules. Regardless of the financial centre's policy, rules responding to the exchange rate dominate over purely inward-looking rules for the financial periphery. |
| Keywords: | policy cooperation, global financial cycle, currency mismatch |
| JEL: | E44 E52 E58 E61 F34 F42 |
| URL: | http://d.repec.org/n?u=RePEc:liv:livedp:202405&r=fdg |
| By: | Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Yishuo Ma (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan) |
| Abstract: | While policy reaction functions of most major central banks are routinely approximated by fitting Taylor (type) rules to their policy rate, there is no such consensus for the People's Bank of China (PBoC). What makes it hard to get a clear impression of the “true†reaction function is that most papers in the extensive literature focus on a single aspect of the reaction function typically mostly comparing it to one (or a few) widely used baseline models. Contrarily, we assess a broad range of questions regarding the reaction function in a unified approach, estimating several hundred reaction functions. While we find that no single policy measure fully captures all aspects of the PBoC's policy, our paper provides clear evidence for asymmetric behavior, support for an important role of monetary aggregates, and robust evidence for the PBoC considering both financial stability and exchange rate stabilization in its policy deliberations. |
| Keywords: | China, monetary policy, reaction function, Taylor rule |
| JEL: | E58 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:fds:dpaper:202405&r=fdg |
| By: | Bardoscia, Marco (Bank of England); Carro, Adrian (Banco de España, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford); Hinterschweiger, Marc (Bank of England); Napoletano, Mauro (Scuola Superiore Sant’Anna); Popoyan, Lilit (Queen Mary, University of London); Roventini, Andrea (Scuola Superiore Sant’Anna); Uluc, Arzu (Bank of England) |
| Abstract: | We develop a macroeconomic agent-based model to study the joint impact of borrower and lender-based prudential policies on the housing and credit markets and the economy more widely. We perform three experiments: (i) an increase of total capital requirements; (ii) an introduction of a loan-to-income (LTI) cap on mortgages to owner-occupiers; and (iii) a joint introduction of both experiments at the same time. Our results suggest that tightening capital requirements leads to a sharp decrease in commercial and mortgage lending, and housing transactions. When the LTI cap is in place, house prices fall sharply relative to income, and the homeownership rate decreases. When both policy instruments are combined, we find that housing transactions and prices drop. Both policies have a positive impact on real GDP and unemployment, while there is no material impact on inflation and the real interest rate. |
| Keywords: | Prudential policies; housing market; macroeconomy; agent-based models |
| JEL: | C63 D10 D31 E58 G21 G28 R20 R21 R31 |
| Date: | 2024–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:1066&r=fdg |
| By: | Simplice Asongu (Pretoria, South Africa); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | This study assesses the relevance of foreign aid in the incidence of capital flight on unemployment in 20 countries in sub-Saharan Africa. The study is for the period 1996-2018, and the empirical evidence is based on interactive quantile regressions in order to assess the nexuses throughout the conditional distribution of the unemployment outcome variable. From the findings, capital flight has a positive unconditional incidence on unemployment, while foreign aid dampens the underlying positive unconditional nexus. Moreover, in order for the positive incidence of capital flight to be completely dampened, foreign aid thresholds of 2.230 and 3.964 (% of GDP) are needed at the 10th and 25th quantiles, respectively, of the conditional distribution of unemployment. It follows that the relevance of foreign aid in crowding out the unfavorable incidence of capital flight on unemployment is significantly apparent only in bottom quantiles or countries with below-median levels of unemployment. Policy implications are discussed. The study complements the extant literature by assessing the importance of development assistance in how capital flight affects unemployment in sub-Saharan Africa. |
| Keywords: | foreign aid; capital flight; unemployment; Sub-Saharan Africa |
| JEL: | C50 D74 F23 N40 O55 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:24/007&r=fdg |
| By: | Yaovi Mawuena; Julien Martin |
| Abstract: | There is no empirical study on the effects of outward foreign direct investment (FDI) on domestic employment in Canada. This note explains the importance of examining this issue and proposes a series of preliminary results on this question from the analysis of the effect of FDI on employment in 35 metropolitan regions, 16 sectors, and 20 years. The results show that outward FDI have a positive effect on local employment, indicating a form of complementarity between foreign investments and domestic employment. This complementarity is more pronounced in the extraction, manufacturing, and professional services sectors. It is also more pronounced when investments are directed towards OECD member countries. The complementarity between outward FDI and local employment suggests that policies supporting outward FDI could be considered on par with export support policies or policies to attract inward FDI to Canada. Il n’existe pas d’étude empirique sur les effets des investissements directs à l’étranger (IDE) sortants sur l’emploi domestique au Canada. Cette note explique l’importance d’examiner cette question et propose une série de résultats préliminaires sur cette question à partir de l’analyse de l’effet des IDE sur l’emploi dans 35 régions métropolitaines, 16 secteurs et 20 années. Les résultats montrent que les IDE sortants ont un effet positif sur l’emploi local, ce qui traduit une forme de complémentarité entre investissements à l’étranger et emploi domestique. La complémentarité est plus marquée dans les secteurs de l’extraction, de la fabrication et les services professionnels. Elle est aussi plus marquée lorsque les investissements sont dirigés vers des pays membres de l’OCDE. La complémentarité entre IDE sortant et emploi local suggère que des politiques de soutien des IDE sortant pourraient être envisagées au même titre que les politiques de soutien à l’exportation ou des politiques d’attraction des IDE entrant au Canada. |
| Keywords: | Foreign direct investment, Local employment, Spillovers, Metropolitan areas, Economic development, Investissements directs étrangers, Emploi local, Spillovers, Aires métropolitaines, Développement économique |
| Date: | 2024–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:cir:circah:2024pr-01&r=fdg |
| By: | Mr. Eugenio M Cerutti; Mr. Jiaqian Chen; Martina Hengge |
| Abstract: | The rapid growth of crypto assets raises important questions about their cross-border usage. To gain a better understanding of cross-border Bitcoin flows, we use raw data covering both on-chain (on the Bitcoin blockchain) and off-chain (outside the Bitcoin blockchain) transactions globally. We provide a detailed description of available methodologies and datasets, and discuss the crucial assumptions behind the quantification of cross-border flows. We then present novel stylized facts about Bitcoin cross-border flows and study their global and domestic drivers. Bitcoin cross-border flows respond differently than capital flows to traditional drivers of capital flows, and differences appear between on-chain and off-chain Bitcoin cross-border flows. Off-chain cross-border flows seem correlated with incentives to avoid capital flow restrictions. |
| Keywords: | Crypto assets; Bitcoin; Cross-border flows; Capital flows |
| Date: | 2024–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/085&r=fdg |
| By: | Rodriguez, Harold; Colombo, Jefferson |
| Abstract: | Spot bitcoin ETFs have been recently approved in the U.S., increasing retail and institutional investors' attention to the crypto space. Still, empirical evidence on whether Bitcoin is an asset that protects investors against inflation is still inconclusive. To contribute to this debate, we analyze the effect of inflation shocks on bitcoin returns through the estimation and inference of Vector Autoregressive Models (VARs). Unlike previous research on the topic, we identify inflation shocks as surprises in the US’s CPI and Core PCE announcements: the difference between the announced inflation and the analysts’ consensus. The results, based on monthly data between August 2010 and January 2023, indicate that bitcoin returns increase significantly after a positive inflationary shock, corroborating empirical evidence that Bitcoin can act as an inflation hedge. However, we observe that bitcoin’s inflationary hedging property is sensitive to the price index -- it only holds for CPI shocks -- and to the period of analysis –- the hedging property stems primarily from sample periods before the increasing institutional adoption of BTC (``early days''). Thus, the inflation-hedging property of Bitcoin is context-specific and is likely to be diminishing as adoption increases. This research contributes to the still under-explored strand of literature that analyzes the hedging and safe-haven properties of Bitcoin and benefits asset managers, investors, and monetary authorities. |
| Keywords: | Bitcoin, Hedge against inflation, Unexpected inflation, surprises in CPI, surprises in PCE. |
| JEL: | E31 E44 G11 |
| Date: | 2024–03–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120477&r=fdg |
| By: | Vassilios Babalos (Department of Accounting and Finance, University of Peloponnese, Antikalamos, 24100 Kalamata, Greece); Elie Bouri (School of Business, Lebanese American University, Lebanon); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | This paper provides first empirical evidence on whether the introduction of US spot Bitcoin ETFs affected the returns and volatility of major cryptocurrencies. Using data from December 18, 2017 to March 15, 2024 and applying various Generalized Autoregressive Conditional Heteroskedasticity (GARCH) with exogenous predictors (X), i.e., GARCH-X models, the main results show that the volatility of major cryptocurrencies, namely Ethereum, Ripple, and Litecoin, decreased following the SEC approval, which supports the stabilization hypothesis. No impact is noticed for the Bitcoin spot market, whereas the returns of Grayscale Bitcoin Trust (which represents the first publicly-traded Bitcoin fund in the US) increased following the introduction of Bitcoin ETFs. Further analysis on the returns and volatility of Bitcoin futures and Ethereum futures indicate an insignificant impact by the launch of US spot Bitcoin ETFs. Our findings enhance the limited understanding on the price discovery and functioning of the cryptocurrency markets, which could be useful for investors, regulators, and policymakers. |
| Keywords: | US spot Bitcoin ETFs introduction, SEC approval, Cryptocurrency spot returns and volatility, GARCH-X models |
| JEL: | C32 G00 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202416&r=fdg |
| By: | François Facchini (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Sophie Massin (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique, IÉSEG School Of Management [Puteaux]); Kevin Brookes (PACTE - Pacte, Laboratoire de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes) |
| Abstract: | This paper draws on macroeconomics, the economics of institutions and the economics of trust to explain private savings at the national level for 33 OECD (mostly European) countries from 2002 to 2012. More specifically, it raises two questions: (i) is it the quality of institutions or trust in institutions that drives private savings? (ii) if trust matters, what is the appropriate institutional level at which it operates? To answer these questions, we add to the usual explanatory variables of private savings three measures of institutional quality and six measures of institutional trust, distributed between the following institutional levels, presented in assumed hierarchical order: political, legal, financial and social. We find that trust in political institutions is the most significant driver of private savings. This contributes to the literature underlining the importance of subjectivity in social and economic phenomena and suggests, for private bank savings in countries having highly regulated banking systems, the existence of a hierarchy of trust in which trust in the highest-ranking institutions (political – and to a lesser extent legal – institutions) acts as a substitute for trust in every lower-ranking institution (financial institutions and social trust). |
| Abstract: | Cet article s'appuie sur la macroéconomie, l'économie des institutions et l'économie de la confiance pour expliquer l'épargne privée au niveau national dans 33 pays de l'OCDE (pour la plupart européens) de 2002 à 2012. Plus précisément, il soulève deux questions : (i) est-ce la qualité des institutions ou confiance dans les institutions qui stimulent l'épargne privée ? (ii) si la confiance est importante, quel est le niveau institutionnel approprié auquel elle opère ? Pour répondre à ces questions, nous ajoutons aux variables explicatives habituelles de l'épargne privée trois mesures de qualité institutionnelle et six mesures de confiance institutionnelle, réparties entre les niveaux institutionnels suivants, présentés dans un ordre hiérarchique supposé : politique, juridique, financier et social. Nous constatons que la confiance dans les institutions politiques est le moteur le plus important de l'épargne privée. Ceci contribue à la littérature soulignant l'importance de la subjectivité dans les phénomènes sociaux et économiques et suggère, pour l'épargne des banques privées dans les pays dotés de systèmes bancaires très réglementés, l'existence d'une hiérarchie de confiance dans laquelle la confiance dans les institutions les plus hautes (politiques – et dans une moindre mesure, les institutions juridiques) se substituent à la confiance dans toutes les institutions de rang inférieur (institutions financières et confiance sociale). |
| Keywords: | belief, institutional quality, social trust, private saving, subjectivity, institutional trust, property right |
| Date: | 2024–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04379761&r=fdg |
| By: | Matthew O'Donnell; Aleksandar Vasilev |
| Abstract: | This paper analyses the link between interest rates and consumption in the UK and will allow better understanding of the relationship between these two variables, as this is extremely important to the Bank of England and the monetary policy that it adopts. Analysis of the empirical evidence from the period last 60 years has produced some interesting observations and the most significant discovery was the way consumption responds to interest rates changed over time. In the first 30 years the real interest rate had a much higher coefficient, with the lagged variable being insignificant. However, in the second period, the opposite occurred, and the lagged variable had a significantly higher coefficient. Overall, consumption and interest rates do have an inverse relationship, as in both periods the interest rate experienced a negative coefficient when regressed with consumption. Therefore, changes in consumer decision making, and the development of a lagged response to interest rate changes could alter how governments influence consumption. |
| Keywords: | consumption, interest rate, modelling, UK |
| JEL: | E21 C32 |
| Date: | 2024–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2024_01&r=fdg |
| By: | Siciliani, Paolo (Bank of England); Eccles, Peter (Bank of England) |
| Abstract: | We analyse how the design of credit registers can influence competition in lending markets. We focus on a particular design choice, namely whether or not credit registers should record previous loan applications that did not result to a subsequent loan origination. This design choice can have subtle effects to the extent that the fact that a prospective borrower has previously applied with other lenders for the same loan can be informative. This is particularly likely to be the case if the failed or withdrawn application was with an innovative lender that is better at screening prospective borrowers thanks to the use of Big Data-driven methodologies (eg ML and AI) alongside the traditional credit scoring approach. On the one hand, we find that when credit registers record previous loan requests rates advertised to borrowers are lower than when credit registers do not record loan requests. On the other hand, the incentives to invest in advanced screening technologies are weakened as a result. |
| Keywords: | Innovation; competition; disclosure; credit markets |
| JEL: | G20 L15 L40 |
| Date: | 2024–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:1067&r=fdg |
| By: | Josep Dols-Miro (Universitat de València, Valencia, Spain); Joaquim Cuevas (Universitat de València, Valencia, Spain); Juan Fernández de Guevara (Instituto Valenciano de Investigaciones Económicas (IVIE), Valencia, Spain) |
| Abstract: | This study links the evolution of market power in the Spanish banking sector since 1971 with changes in banking regulation between 1970 and 1990. The main contributions are: 1) An exhaustive chronology of liberalization and deregulation measures in the sector during those years is provided; and 2) Market power is empirically measured for over 40 years using the Lerner Index. A decrease in market power in the 70s was observed, coinciding with increased competition through the branch network, followed by an increase in the 80s, as the liberalization process was affected by the economic cycle. Since 1988, competition intensified with the consolidation of liberalization measures. The results allow for an additional hypothesis in the literature analyzing competition in the Spanish banking sector: There seems to be no evidence that the bulk of deregulation was the trigger per se for rivalry. Rather, it appears that entities anticipated, taking advantage of the imminent changes, and the increase in competition was early. Possibly, it was not the regulatory changes. The latent rivalry between entities took advantage of the opportunities offered by liberalization. |
| Keywords: | Spain, Banking History, Regulation, Lerner Index |
| JEL: | D40 G18 N20 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ahe:dtaehe:2402&r=fdg |
| By: | Yu, Chen |
| Abstract: | "The Rise of Supermoney in World Politics" examines the escalating influence of an elite group of wealthy individuals, multinational corporations, and financial entities on the global political and economic landscape. This article traces the historical evolution of financial power, identifying key milestones that have led to the emergence of Supermoney - a term used to describe entities with significant financial resources and global influence. Through a comprehensive analysis, the article delineates the mechanisms through which Supermoney exerts influence, including financial investments, policy lobbying, philanthropic endeavors, and technological innovation. Looking ahead, the article discusses potential scenarios for the increasing influence of Supermoney, highlighting the role of regulation, international cooperation, and the opportunities and challenges this influence presents. The conclusion underscores the dual nature of Supermoney's rise, acknowledging its potential to contribute to global good while also cautioning against the risks of power concentration, economic disparities, and the undermining of democratic governance. |
| Date: | 2024–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:osf:thesis:6nqtf&r=fdg |
| By: | Chukwunonso Ekesiobi (Anambra State, Nigeria.); Stephen Obinozie Ogwu (Asaba, Delta State, Nigeria); Joshua Chukwuma Onwe (Enugu State, Nigeria); Ogonna Ifebi (Anambra State, Nigeria); Precious Muhammed Emmanuel (University of Ibadan, Nigeria); Kingsley Nze Ashibogwu (Ozoro, Delta State, Nigeria) |
| Abstract: | Our study assesses financial development and debt status impact on energy efficiency in Nigeria as a developing economy. We combined the Autoregressive Distributed Lag (ARDL), FMOLS, and CCR analytical methods to estimate the parameters for energy efficiency policy recommendations. Secondary data between 1990 and 2020 were used for the analysis. The result confirms the long-run nexus between energy efficiency, financial development and total debt stock. Furthermore, the ARDL estimates for our key variables show that financial development promotes energy efficiency in the short run but hinders long-run energy efficiency. Total debt stock limits energy efficiency in Nigeria in short and long-run periods. The environmental consequences of energy intensity are being felt globally, with the developing countries most vulnerable. The cheapest way to curb these consequences is to promote energy efficiency to reduce the disastrous effect. Driving energy efficiency requires investment in energy-efficient technology, but the challenge for developing economies i.e. Nigeria's funding, remains challenging amid a blotted debt profile. This becomes crucial to investigate how financial sector development and debt management can accelerate energy-efficient investments in Nigeria. The financial sector must ensure the availability of long-term credit facilities to clean energy investors. The government must maintain a sustainable debt profile to pave the way for capital expenditure on clean energy projects that promote energy efficiency. The limitation of this study is that the scope is limited to Nigeria as a developing economy. The need to support energy efficiency projects is a global call requiring cross-country analysis. Despite our study focusing on Nigeria, it provides useful insights that can guide energy efficiency policy through the financial sector and debt management. |
| Keywords: | Financial Development, Public Debt, Energy Efficiency, Environment, Nigeria |
| JEL: | E22 E44 E62 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:24/016&r=fdg |