Investigating the Dynamic Relationships Among Disaggregate Components of Financial Development, Renewable Energy Consumption and Environmental Degradation

This study investigates the relationship between disaggregate components of financial development and CO 2 emissions by considering the complicated and multidimensional nature of modern financial systems across the globe. Using panel data for 46 Sub Saharan Africa countries ranging from 1991 to 2016, we adopt the dynamic generalized-method-of moment system (sys-GMM) model to investigate the aforementioned objective of the study. The empirical results show that the development of financial market and its sub-measures such as financial market access, depth and efficiency further raise CO 2 emissions in the region. The similar impact is found for the development of financial institution and its sub-measures. However, the development of financial market has a smaller impact on CO 2 emissions compared to the development of financial institution. The results further reveal that renewable energy consumption reduces CO 2 emissions significantly. An increasing role of financial markets complement renewable energy to improve the quality of the environment. The study also reveal that the relationships among these variables and CO 2 emissions vary across countries due to different level of economic development. The policy implications are also discussed in the current study.