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Leveraging BITs and institutional quality for sustainable development: The moderating role of climate-related development finance

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  • Awijen, Haithem
  • Dao, Thuy
  • Ameur, Hachmi Ben

Abstract

This study investigates the interplay between bilateral investment treaties (BITs), institutional quality, and climate-related development finance (CRDF) in fostering sustainable development. Using a dataset covering 35 countries from 1990 to 2022, we employ static fixed-effects models to analyze the impact of BITs and CRDF on four sustainability metrics: the gross savings rate (GrossSR), genuine savings rate (GenSR), CO2 emissions, and resource depletion. Our findings indicate that BITs generally enhance the GrossSR and GenSR, particularly in the presence of robust institutional frameworks. CRDF consistently shows a negative association with CO2 emissions and resource depletion, emphasizing its role in mitigating environmental degradation. The interaction terms reveal that the effectiveness of BITs in promoting sustainability is significantly moderated by institutional quality, highlighting the necessity of considering broader institutional contexts in policy formulation. These results underscore the complex dynamics between foreign investment, institutional quality, and environmental sustainability, providing crucial insights for policymakers in developing economies.

Suggested Citation

  • Awijen, Haithem & Dao, Thuy & Ameur, Hachmi Ben, 2025. "Leveraging BITs and institutional quality for sustainable development: The moderating role of climate-related development finance," Research in International Business and Finance, Elsevier, vol. 77(PB).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001679
    DOI: 10.1016/j.ribaf.2025.102911
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    Keywords

    Institutional quality; Green finance; Environmental sustainability;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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