Does political conflict tilt finance-renewable energy dynamics in Africa? Accounting for the multi-dimensional approach to financial development and threshold effect of political conflict

Abstract

In order to shed empirical light on the impact of the multi-dimensional decomposition of financial development indicators on renewable energy usage, this study investigates the threshold effect of political conflict on finance-energy dynamics in Africa. The research output relies on a panel of 46 African nations from 2010 to 2020, using IV-GMM estimators that are robust to cross-sectional dependence and allow for heterogeneous slope coefficients. The results of direct, indirect, and threshold equations show that i.) Financial development indicators spur renewable energy consumption, while political conflict drags it. ii.) There is a threshold at which financial development could spur renewable energy in some regions of Africa, and the tendency of financial development to maintain such capacity is conditioned on the accessibility of financial facilities and political conflict/stability within a specific range of threshold values. iii.) the threshold level assessment shows that 11 countries in the panel, including Botswana, Mauritius, Cape Verde, Namibia, Seychelles, Zambia, Sao Tome and Principe, Gabon, Ghana and Benin Rep., are above the threshold level of political conflict in Africa. From a policy angle, driving up renewable energy consumption in Africa requires the government to provide enabling safety net environment for the diversification of finance options targeting innovative shifts away from traditional energy sources to the expansion of alternative renewable energy ventures.