Financial Development, Human Capital Development and Climate Change in East and Southern Africa

Abstract

Africa is currently experiencing both financial and human development challenges. While several continents have advocated for financial development in order to acquire environmentally friendly machinery that produces less emissions and ensures long-term sustainability, Africa is still lagging behind the rest of the world. Similarly, Africa's human development has remained stagnant, posing a serious threat to climate change if not addressed. Building on the underpinnings of the Environmental Kuznets Curve (EKC) hypothesis on the nexus between economic growth and environmental pollution, this study contributes to empirical research seeking to promote environmental sustainability as follows. First, it investigates the link between financial development, human capital development and climate change in East and Southern Africa. Second, six advanced panel techniquesare used, and they include: (1) cross-sectional dependency (CD) tests; (2) combined panel unit root tests; (3) combined panel cointegration tests; (4) panel VAR/VEC Granger causality tests and (5) combined variance decomposition analysis based on Cholesky and Generalised weights.Our finding shows that financial and human capital developments are important in reducing CO2 emissions and promoting environmental sustainability in East and Southern Africa.

Finance, poverty-income inequality, energy consumption and the CO2emissions nexus in Africa

“…Furthermore, Wolde-Rufael (2009) shared that energy was no more than a growth factor in 11 out of 17 African countries. Recent arguments by Jarrett (2017), Asongu and Odhiambo (2021) and Shobande and Asongu (2021) pointed out that countries in Africa are characterized by the worse energy and power grid systems in the world. This phenomenon poses significant environmental risks and concerns and a poor energy supply in the sub-region.…”

Human Development and Governance in Africa

“…The positioning of this study departs from the contemporary extant HDI literature which has largely focused on, inter alia : the nexus between resource rents and inclusive human development (Nchofoung et al 2021); linear and non-linear impacts of infrastructures on inclusive human development (Nchofoung et al 2022); nexuses between knowledge creation, mobile technology, knowledge diffusion, and inclusion human development (Asongu 2021); the moderating role of governance quality in taxing for inclusion human development (Adegboye et al 2021); linkages between human development, financial development, and climate change (Shobande and Asongu 2021); and connections between remittances, good governance, and human development (Kamalu and Ibrahim 2021).…”