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Breaking the carbon curse: The role of financial development in facilitating low‐carbon and sustainable development in Algeria

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  • Chinazaekpere Nwani
  • Ekpeno L. Effiong
  • Sunday Ituma Okpoto
  • Ikechukwu Kingsley Okere

Abstract

This paper investigates the oil resource abundance and environmental quality nexus in Algeria, with emphasis on the role of oil export receipts and domestic oil consumption, and whether financial development is a policy option for reducing carbon dioxide (CO2) emissions in the economy. Using time series data from 1971 to 2016, the Bayer–Hanck test for cointegration confirms the presence of a long‐run equilibrium relationship among the variables. Further analyses based on the auto‐regressive distributed lag (ARDL) model, fully modified least square (FMOLS), dynamic ordinary least square (DOLS), canonical cointegration regression (CCR) and Granger causality based on the vector error correction model (VECM) confirm the oil resource abundance curse in Algeria via the impact of domestic oil consumption on environmental quality. The estimates also show that financial development reduces CO2 emissions and has both short‐run and long‐run causal impact on economic growth. Thus, deepening financial sector development can be instrumental for achieving a low‐carbon and sustainable economy in Algeria.

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  • Chinazaekpere Nwani & Ekpeno L. Effiong & Sunday Ituma Okpoto & Ikechukwu Kingsley Okere, 2021. "Breaking the carbon curse: The role of financial development in facilitating low‐carbon and sustainable development in Algeria," African Development Review, African Development Bank, vol. 33(2), pages 300-315, June.
    • Handle: RePEc:bla:afrdev:v:33:y:2021:i:2:p:300-315
    DOI: 10.1111/1467-8268.12576
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    2. Paul Terhemba Iorember & Solomon Gbaka & Gylych Jelilov & Nargiza Alymkulova & Ojonugwa Usman, 2022. "Impact of international trade, energy consumption and income on environmental degradation in Africa's OPEC member countries," African Development Review, African Development Bank, vol. 34(2), pages 175-187, June.
    3. Chika A. Anisiuba & Hillary Chijindu Ezeaku & Samuel Manyo Takon & Maureen Ifeoma Iyke‐Ofoedu & Godwin Imo Ibe & Obiamaka P. Egbo, 2024. "Impact of carbon pricing on comparative advantage in environmental goods export in sub‐Saharan Africa: Evidence of asymmetries from South Africa," African Development Review, African Development Bank, vol. 36(2), pages 173-186, June.
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    5. Fan, Meiting & Li, Mengxu & Liu, Jianghua & Shao, Shuai, 2022. "Is high natural resource dependence doomed to low carbon emission efficiency? Evidence from 283 cities in China," Energy Economics, Elsevier, vol. 115(C).

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