Financing the Alternative: Renewable Energy in Developing and Transition Countries

CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No. 06/49

25 Pages Posted: 5 Sep 2006

See all articles by Christa N. Brunnschweiler

Christa N. Brunnschweiler

Norwegian University of Science and Technology (NTNU) - Department of Economics; University of Oxford - OxCarre

Date Written: March 2006

Abstract

This paper examines the determinants of credit allocation to renewable energy firms in developing and transition countries. Using a simple endogenous growth model, we show that the development of the renewable energy sector, i.e. the diversification of renewable energy resources used in primary energy production, depends on the quality of financial intermediation, debtor information costs to banks, and financing needs of renewable energy firms. Policies should aim at increasing financial sector performance through better institutional frameworks and improving financing conditions for new energy firms. The empirical analysis confirms the positive effect of financial intermediary development on the renewable energy sector.

Keywords: Financial intermediation, banks, renewable energy, economic growth

JEL Classification: Q42, G10, O41

Suggested Citation

Brunnschweiler, Christa N., Financing the Alternative: Renewable Energy in Developing and Transition Countries (March 2006). CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No. 06/49. Available at SSRN: https://ssrn.com/abstract=928311 or http://dx.doi.org/10.2139/ssrn.928311

Christa N. Brunnschweiler (Contact Author)

Norwegian University of Science and Technology (NTNU) - Department of Economics ( email )

N-7491 Trondheim
Norway

University of Oxford - OxCarre ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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