Asymmetric effect of remittances and financial development on carbon emissions in sub-Saharan Africa: an application of panel NARDL approach

Abstract

Purpose While several existing panel studies have focused on the linear specifications of the effect of remittances and financial development on carbon emissions, nonlinear panel studies on this subject remain thin on the ground. The purpose of this paper is to examine the asymmetric effect of remittances and financial development on carbon emissions in 31 selected sub-Saharan African countries for the period spanning from 1996 to 2018. Design/methodology/approach The Kao, Pedroni and Johansen–Fisher co-integration tests were conducted to ascertain a long-run relationship among the studied variables, whereas the nonlinear panel autoregressive distributed lag approach was applied to account for asymmetries. Findings The study revealed, among other things, that remittances and financial development asymmetrically influence carbon emissions in the selected panel of sub-Saharan African countries. In the long run, the positive shock in remittances on carbon emissions is greater than in the negative shock in remittances. Additionally, both positive and negative shocks in financial development mitigate carbon emissions. Research limitations/implications The implications of this study include the need to provide tax incentives to remitters and encourage them to invest in clean technologies so as to maintain sustainable development and low carbon emissions in the environment. There is also the need for governments and policymakers to formulate policies aimed at improving the functioning of the financial sectors in sub-Saharan Africa. Originality/value The positive and negative shocks of remittances and financial development on carbon emissions are examined to ascertain their asymmetric relationships.