FDI, Energy Consumption, and Institutional Quality

Abstract

Being economic boosters, foreign direct investment (FDI) and financial sector development (FSD) are highly recommended for developing countries. It is therefore critical and important to examine the impact of both FDI and FSD on energy consumption. This chapter examines the link between FDI, FSD, and energy consumption in Africa and also the role of institutional quality in this context. The results establish that both FDI and FSD have a significant positive impact on energy consumption. It is also established that there is an inverse relationship between institutional quality and energy use. Finally, it is proved that quality institutions moderate the link between FDI, FSD, and energy use in Africa.