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The Relationship between Financial Development and Private Investment Commitments in Energy Projects

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  • Lika Ba, Farid Gasmi, and Paul Noumba Um

    (Ecole des Hautes Etudes en Sciences Sociales, Toulouse School of Economics, University of Toulouse Capitole, and The World Bank)

Abstract

This paper investigates the extent to which the level of development of country¡¯s financial sector draws private participation in energy projects¡¯ financing in a 1990-2007 dataset on 56 developing countries. We find that a financial sector that offers proper financing and risk-mitigating instruments indeed contributes to improving private participation. Macroeconomic development and stability and greater energy needs are also found to be significant determinants of a country¡¯s appeal to private investors. While country risk dampens investors¡¯ will to participate in energy projects, higher interest rate and exchange rate risk do not seem to divert them away.

Suggested Citation

  • Lika Ba, Farid Gasmi, and Paul Noumba Um, 2017. "The Relationship between Financial Development and Private Investment Commitments in Energy Projects," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(3), pages 17-40, September.
    • Handle: RePEc:jed:journl:v:42:y:2017:i:3:p:17-40
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    Cited by:

    1. Kodongo, Odongo & Mukoki, Paul & Ojah, Kalu, 2023. "Bond market development and infrastructure-gap reduction: The case of Sub-saharan Africa," Economic Modelling, Elsevier, vol. 121(C).

    More about this item

    Keywords

    Infrastructure; Energy; Public-private Partnership; Financial Development; Growth; Panel Data;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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