The financial development and renewable energy consumption nexus in Africa: Does the quality of governance matter?

Abstract

Abstract The impact of financial development (FD) on renewable energy consumption has been extensively examined in recent years. Nevertheless, studies on the moderation of quality of governance in the financial development and renewable energy consumption nexus are sparse. By filling the gap in the literature relating to energy economicsc, this study investigates the moderating effect of the quality of governance on the relationship between financial development and consumption of renewable energy for a panel of 33 African countries over the period between 2000 and 2020. The fully modified ordinary least squares (FMOLS) estimation technique is used to account for cointegration and cross‐sectional dependence. The results unveil that the impact of governance quality and financial development on renewable energy consumption is negative and statistically significant. Moreover, the results reveal that the FD‐governance quality interactions are significant and negative. Governance quality thresholds at which the negative incidence of financial development on renewable energy consumption is completely nullified are provided.