Does Economic Freedom Matter for Bank Performance and Energy Consumption?

Abstract

This study investigates the influence of economic freedom on energy consumption and bank performance in Ghana over the period 2000-2017. Specifically, the authors examine the effect of the various components of economic freedom on total energy usage, fossil fuel consumption, and bank performance. The study applies the fully modified ordinary least squares (FMOLS) method to determine the long-run influence of economic freedom indicators on energy consumption and bank performance. The results show that aside from business freedom, all the other sub-economic freedom measures significantly drive total energy consumption. The authors reveal that investment and fiscal freedom significantly influence fossil fuel consumption. The findings also establish that financial, investment, and fiscal freedom indices exert a significant effect on bank performance. These results hold regardless of the measure of bank performance. In light of the findings, the authors discuss relevant policy implications.