Is the level of financial sector development a key determinant of private investment in the power sector?
TThis paper seeks to assess the extent to which a country’s overall level of development and that of its financial sector, in particular, are factors that attract private capital into infrastructure projects. The authors investigate these effects in a 1990–2007 dataset on the power sector in 37 developing countries. The results suggest that economic growth is a key determinant of private investors’ investment in infrastructure projects, and that investors tend to take countries’ governance quality into account in their decisions to invest. The empirical results highlight that the development of the financial sector also plays a significant role in private investors’ decisions to enter infrastructure sectors. In particular, the degree of country risk and exchange rate volatility is found to be negatively This paper—a product of the Sustainable Development Department, Middle East and North Africa Region—is part of a larger effort in the department to promote infrastructure development in client countries through applied research targeting cutting-edge policy, regulatory and infrastructure finance issues. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at firstname.lastname@example.org. related to the volume of private sector investment in power projects. Furthermore, when the banking sector and the capital market are separately treated in the analysis, the existence of a well functioning capital market is the main attracting factor. In addition, the existence of an independent energy regulatory authority significantly improves the level of private investors’ implication in energy projects. When accounting for the interactions between the overall economic development and the financial sector development variables, the effects of these variables are still significant and the results also confirm the importance of an independent energy sector regulator.
|Date of creation:||Jul 2010|
|Date of revision:|
|Contact details of provider:|| Phone: (+33) 5 61 12 86 23|
Web page: http://www.tse-fr.eu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Zhang, Yingang & Parker, David & Kirkpatrick, Colin, 2004.
"Competition, Regulation and Privatisation of Electricity Generation in Developing Countries: Does the Sequencing of the Reforms Matter?,"
Centre on Regulation and Competition (CRC) Working papers
30599, University of Manchester, Institute for Development Policy and Management (IDPM).
- Zhang, Yinfang & Parker, David & Kirkpatrick, Colin, 2005. "Competition, regulation and privatisation of electricity generation in developing countries: does the sequencing of the reforms matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(2-3), pages 358-379, May.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Estian Calitz & Johan Fourie, 2010.
"Infrastructure in South Africa: Who is to finance and who is to pay?,"
Development Southern Africa,
Taylor & Francis Journals, vol. 27(2), pages 177-191.
- Estian Calitz & Johan Fourie, 2007. "Infrastructure in South Africa: Who is to finance and who is to pay?," Working Papers 15/2007, Stellenbosch University, Department of Economics.
- Farid Gasmi & Paul Noumba Um & Laura Recuero Virto, 2009.
"Political Accountability and Regulatory Performance in Infrastructure Industries: An Empirical Analysis,"
World Bank Economic Review,
World Bank Group, vol. 23(3), pages 509-531, October.
- Gasmi, Farid & Noumba Um, Paul & Virto, Laura Recuero, 2006. "Political accountability and regulatory performance in infrastructure industries : an empirical analysis," Policy Research Working Paper Series 4101, The World Bank.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Daniel Platz, 2009. "Infrastructure finance in developing countries—the potential of sub-sovereign bonds," Working Papers 76, United Nations, Department of Economics and Social Affairs.
- Pargal, Sheoli, 2003. "Regulation and private sector investment in infrastructure - evidence from Latin America," Policy Research Working Paper Series 3037, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:23347. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.