Financial development and macroeconomic sustainability: modeling based on a modified environmental Kuznets curve
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Financial development and macroeconomic sustainability: modeling based on a modified environmental Kuznets curve Adel Ben Youssef 1 & Sabri Boubaker 2,3 & Anis Omri 4,5 Received: 14 April 2020 / Accepted: 28 October 2020/ # Springer Nature B.V. 2020
Abstract
Sustainability has become an important and widely applied concept in the environmental economics literature. Despite the numerous studies employing an environmental Kuznets curve (EKC), this model has been critiqued for its incompleteness. This article builds a modified EKC model to examine the contribution of financial development for achieving sustainable development in the case of 14 selected Middle East and North Africa (MENA) countries. Using the Augmented Mean Group (AMG) and Common Correlated Effects Mean Group (CCEMG) estimators, our empirical results show that the EKC hypothesis is valid for per capita CO2 emissions and ecological footprint. The results provide evidence also of the presence of linear and non-linear relationships between financial development and non-sustainability and indicate that financial development is likely to have a small long-term impact on sustainable development. This suggests that current efforts aimed at protecting the environment and achieving sustainability will be ineffective given the extent of the problem. Keywords Financial development . Sustainable development . Modified EKC model
* Anis Omri [email protected]; [email protected]
1
University Côte d’Azur, France, ISEM, 24 Avenue des Diables Bleus, 06300 Nice, France
2
Métis Lab, EM Normandie Business School, Le Havre, France
3
International School, Vietnam National University, Hanoi, Vietnam
4
Department of Business Administration, College of Business and Economics, Qassim University, P.O. Box: 6640, Buraidah, Qassim 51452, Saudi Arabia
5
Department of Economics, Faculty of Economics and Management of Nabeul, University of Carhage, Tunis, Tunisia
Climatic Change
1 Introduction Meeting the sustainable development goals (SDGs) has become a global issue. It has been suggested that their achievement will require a well-developed financial sector to stimulate economic growth, determine efficient resource allocation, and contribute to protecting the environment by financing viable and environmentally friendly projects. Several studies suggest that lack of a well-developed financial sector is a major barrier to sustainable development (e.g., Garcia, 2013; Kayani et al. 2020). Drawing on this research, we contribute to this debate by examining how financial development contributes to macroeconomic sustainability in the MENA countries. The present paper has three motivations: (i) the importance of the financial sector from a sustainability perspective, (ii) the strong need for the MENA economies to achieve sustainable development, and (iii) the need for the MENA countries to accelerate their energy transition and acknowledge the importance of the financial sector in advancing economic growth and enhancing sustainability. First, financial development is essent
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