Title: Financing sustainable development: the role of institutional quality in Latin America

Authors: Patricia Hernández-Medina; Gabriel Ramírez-Torres; Luis Morales-La Paz

Addresses: Universidad Nacional de Chimborazo, Riobamba, 060155, Ecuador ' Universidad Nacional de Chimborazo, Riobamba, 060155, Ecuador ' Universidad Católica Andrés Bello, Caracas, 1020, Venezuela

Abstract: This study analyses the effect of financial flows (sustainable and carbon-intensive) on sustainable development in Latin America, incorporating the mediation of institutional quality (institutional trust and government effectiveness). Eighteen Latin American countries (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay) are considered for the period 2019-2023. Using panel data estimation by the generalised method of moments (GMM), the results indicate that the existence of strong institutions and better government management enhances the effect of sustainable financial flows, which are relatively scarce in Latin America. It also mitigates the adverse effects of carbon-intensive financial flows, through redistributive public policies that improve the results in the social dimension of sustainable development, compensating for the limitations in meeting the objectives of the environmental dimension in the region.

Keywords: sustainable finance; sustainable development; sustainable revenues; sustainable budgets; carbon-intensive revenues; carbon-intensive budgets; institutional quality.

DOI: 10.1504/IJGE.2025.149741

International Journal of Green Economics, 2025 Vol.19 No.2, pp.164 - 181

Received: 19 Mar 2025
Accepted: 12 May 2025
Published online: 11 Nov 2025 *

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