The effect of economic factors on the quality of the environment in African countries: An application of panel quantile regressions

Abstract

Background: To mitigate the climate change, several researches have been conducted to determine the determinant factors of CO2 emissions. Nonetheless, a consensus was failed to reach yet on the issue because many of the previous studies did not deliberate the undetected individual heterogeneity across countries. The study aimed to investigate the effects of economic growth, foreign direct investment and financial development within the research background of seven leading African economies over the 49- year period from 1970 to 2019. Methods: In this study, the determinant factors of environmental quality were examined by employing a panel quantile regression. The advantage of the method is considering the distributional heterogeneity to provide a detailed description regarding the driving factors of carbon emissions. Results: It was revealed that the effects of determinants on CO2 emissions are heterogeneous. The quantile regression estimate describes that the influence of economic growth on CO2 emissions is positive and higher at the 50th quantile than in other classes of quantile. The effect of financial development on CO2 emissions is higher and positive at the 90th quantile compared to other categories of quantile. The FDI influence on CO2 emissions is heterogeneous across different quantiles and the coefficient is significant and larger at the 10th quantile than in all the other quantiles. Conclusion: In addition, 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.