Environmental sustainability and financial development in Africa; does institutional quality play any role?

Matthew Ntow-Gyamfi, Godfred A. Bokpin, Anthony Q.Q. Aboagye, Charles Godfred Ackah

Research output: Contribution to journalArticlepeer-review

50 Citations (Scopus)

Abstract

The Environmental Kuznets Curve (EKC) having been used to explain the relationship between growth and environmental degradation has gained some attention in the finance literature in recent times. In this study, we re-conceptualize the EKC into a Financial Market Environmental Kuznets Curve (FMECK) that explains the relationship between financial development and sustainability, while introducing institutional quality as a moderator. The study posits that there is an Environmental Kuznets Curve for Africa and that the EKC holds for financial development and sustainability. Institutional Quality and Regulatory framework moderate the finance–sustainability nexus, which leads to the conceptualization of FMEKC. We find an inverted ‘U’ relationship between financial development and environmental degradation, which we explain using three arguments. We document that having a robust institutional framework in place could reduce the long-run adverse effects of financial development on the environment.

Original languageEnglish
Pages (from-to)93-118
Number of pages26
JournalDevelopment Studies Research
Volume7
Issue number1
DOIs
Publication statusPublished - 1 Jan 2020
Externally publishedYes

Keywords

  • Africa
  • EKC
  • environmental sustainability
  • financial development
  • institutional quality

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