Foreign Finance and Renewable Energy Transition in D8 Countries: The Moderating Role of Globalization

This study looks at the role of foreign finance in promoting the shift to renewable energy in the Developing-8 (D8) countries—Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan, and Turkey—between 2000 and 2023, with particular focus given to the moderating role of globalization. Utilizing an unbalanced panel dataset covering eight D8 countries over 2000–2023 and applying advanced econometric techniques, including System-GMM, Common Correlated Effects, nd Driscoll–Kraay estimators, the analysis accounts for slope heterogeneity, cross-sectional dependence, and possible endogeneity. The results indicate that foreign finance, and particularly foreign direct investment (FDI), is highly significant in enhancing the supply and demand of renewable energy. Globalization also has an amplification effect as it spurs technology transfer, policy convergence, and market access. The combined impact of foreign finance and globalization is significant and positive in all specifications, indicating that the optimal benefits of foreign capital inflows are realized in highly integrated economies. Alternative globalization measures and tests of renewable energy robustness confirm the stability of the findings. It argues that institutionally reinforcing the foundations, strengthening global integration, and channeling foreign finance into green sectors are central policies for fostering renewable energy transitions in developing economies. This paper provides three contributions to the existing literature. First, it is the pioneering paper that examines systematically the moderating function of globalization on the foreign finance–renewable energy transition nexus in the D8 economies. Second, it applies the latest econometric techniques—System-GMM, CCE, and Driscoll–Kraay—that control for slope heterogeneity, cross-sectional dependence, and endogeneity. Third, it offers policy recommendations for emerging economies on how best to mobilize foreign finance in a globalization context. Unlike prior works that examine these dimensions separately, this study highlights their joint influence, thereby contributing a dual perspective that has been largely absent from the literature.