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Breaking the carbon curse: The role of financial development in facilitating low‐carbon and sustainable development in Algeria
Author(s) -
Nwani Chinazaekpere,
Effiong Ekpeno L.,
Okpoto Sunday Ituma,
Okere Ikechukwu Kingsley
Publication year - 2021
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12576
Subject(s) - cointegration , economics , error correction model , ordinary least squares , resource curse , nexus (standard) , granger causality , econometrics , sustainable development , short run , distributed lag , consumption (sociology) , macroeconomics , natural resource economics , economy , natural resource , ecology , social science , sociology , biology , embedded system , computer science
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 (CO 2 ) 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 CO 2 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.