Revisiting the environmental Kuznet curve in Africa:the interactive role of financial development in sustainable environment

Suraya Mahmood; Jakada, Aminu Hassan; Nazatul Faizah Haron; Danmaraya, Ismail Aliyu

Revisiting the environmental Kuznet curve in Africa:the interactive role of financial development in sustainable environment

2022

Suraya Mahmood | Jakada, Aminu Hassan | Nazatul Faizah Haron | Danmaraya, Ismail Aliyu

The aim of this study is to revisit the validity of EKC hypothesis in six leading African countries, with interaction effect of financial development and economic growth on the quality of environment over a period of 1970 to 2019. The research used the updated version of Driscoll and Kraay model by Hoechle, which resolved the consequences of heteroscedasticity and cross-sectional dependency. The empirical results of the study reveal that the EKC hypothesis is supported in these leading African economies. Carbon emissions increase due to foreign direct investment (FDI) and energy consumption. Financial development improves the environmental quality in these leading African economies. The interactive role of financial development and economic growth increases CO₂ emissions thereby degrading the quality of environment. The study recommends that environmental policies that minimize emissions should be enforced for the purpose of making the environment cleaner, FDI should be environmentally friendly and relevant incentives are required to redirect private credits towards green projects and renewable energy development.

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