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Financing sustainable development: the role of institutional quality in Latin America

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  • Patricia Hernández-Medina
  • Gabriel Ramírez-Torres
  • Luis Morales-La Paz

Abstract

This study analyses the effect of financial flows (sustainable and carbon-intensive) on sustainable development in Latin America, incorporating the mediation of institutional quality (institutional trust and government effectiveness). Eighteen Latin American countries (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay) are considered for the period 2019-2023. Using panel data estimation by the generalised method of moments (GMM), the results indicate that the existence of strong institutions and better government management enhances the effect of sustainable financial flows, which are relatively scarce in Latin America. It also mitigates the adverse effects of carbon-intensive financial flows, through redistributive public policies that improve the results in the social dimension of sustainable development, compensating for the limitations in meeting the objectives of the environmental dimension in the region.

Suggested Citation

  • Patricia Hernández-Medina & Gabriel Ramírez-Torres & Luis Morales-La Paz, 2025. "Financing sustainable development: the role of institutional quality in Latin America," International Journal of Green Economics, Inderscience Enterprises Ltd, vol. 19(2), pages 164-181.
    • Handle: RePEc:ids:ijgrec:v:19:y:2025:i:2:p:164-181
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