Potential economic indicators and environmental quality in African economies: new insight from cross-sectional autoregressive distributed lag approach.

Abstract

Growing economic development and substantial demographic shifts may have a momentous consequence on environmental quality in a number of African countries. Consequently, this recent study offers the opportunity to explore the nexus among unobserved influential economic indicators and environmental quality (measured through CO2 emissions) in a panel of 26 African economies spanning from 1990 to 2018. The aggregated panel is sub-classified into net exporters (NEC) and net importers (NIC) of embodied carbon. Considering existence of cross-section reliance and heterogeneity issues, all observed series are preliminarily confirmed stationary and cointegrated. Further, key outcomes from the common correlated effect Pooled Mean Group (CCEPMG) estimator through cross-sectional autoregressive distributed lag (CSARDL) approach showed that (i) economic growth and fossil fuel energy use stimulate environmental degradation among all panels, (ii) urbanization and trade openness enhance environmental quality in NEC panel while environmental damage is increased in NIC and aggregated panels, (iii) financial development also enhanced environmental quality in the totaled and NEC panel of African countries, but rather maturated climate deterioration in NIC panel, (iv) industrialization had a substantial adverse effect on environmental quality through surge in emission of CO2 concerning the aggregated panel and NEC African states, and (v) overall the environmental Kuznets curve (EKC) conjuncture is validated among all panels. The findings were also affirmed by Augmented Mean Group (AMG) technique. Finally, Dumitrescu-Hurlin Granger causality checks showed strong causal affiliations heterogeneously across all panels. From the policy perspective, the analytical outcomes from this study summarily encourage the introduction of profitable policies that can facilitate green energy and economic structural change to diminish the degree of environmental degradation from emission of CO2. Steps to strengthen a low-carbon and sustainable green environment should therefore collectively address these factors during policy growth.