Modelling for insight: Does financial development improve environmental quality?

By A. Acheampong. Energy Economics, 2019

551 citations recorded by the source corpus.

Abstract The need to formulate policies to mitigate global warming has necessitated the need to understand the drivers of carbon emissions. The current study utilises the system-generalised method of moments to investigate the direct and indirect effect of financial development on carbon emissions for 46 sub-Saharan Africa countries over the period 2000–2015. Using several indicators of financial development, the empirical results reveal that financial development measured using broad money, domestic credit to the private sector and domestic credit to private sector by banks increase carbon emissions while FDI, liquid liabilities and domestic credit to private sector by financial sector do not affect carbon emissions. The results show that none of the financial development indicators exerts a significant nonlinear effect on carbon emissions. The results further indicate that FDI moderates economic growth to reduce carbon emissions but does not moderate energy consumption to affect carbon emissions. Contrarily, financial development measured using broad money, domestic credit to private sector by banks, domestic credit to private sector by financial sector and domestic credit to private sector moderate energy consumption to increase carbon emissions while the first three indicators of financial development moderate economic growth to increase carbon emissions. The results do not confirm the existence of the EKC hypothesis but confirm that population size, energy consumption, trade openness, urbanisation and economic growth increase carbon emissions. There are some variations in these results across regional and income groupings. These findings do advance not only knowledge but also have several implications for sustainable development policy.

Subfields: Economics and Econometrics, Pollution, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/c0d93ae65168680b2d08daa6ed28f4c602c1d741

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Citations in the corpus

Does financial development mitigate carbon emissions? Evidence from heterogeneous financial economies (2020, methodology): “These findings confirm the argument and the findings of Acheampong (2019).”
The effects of environmental innovations on CO2 emissions: Empirical evidence from Europe (2021, background): “While economic openness is conducive to reducing carbon emissions and enhancing efficiency in developed countries (Forslid et al. 2018), for developing countries, it tends to increase CO2 emissions (Acheampong et al. 2019).”
Does renewable energy consumption reduce ecological footprint? Evidence from eight developing countries of Asia (2020, background): “In absolute terms, this increase is estimated at 460 million tons (Acheampong, 2019).”
Financial development and environmental degradation: Do human capital and institutional quality make a difference? (2021, background): “Acheampong (2019) argues that financial development makes it easier for businesses and individuals to have access to cheap credits that enable them to start a new business or expand their existing business.”
Does the inflow of remittances and energy consumption increase CO2 emissions in the era of globalization? A global perspective (2020, background): “2019) which has an adverse impact on human and sustainable development (Acheampong 2019).”