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The implications of climate change and extreme weather events for fiscal balance and fiscal policy in Africa

Author

Listed:
  • Mark Edem Kunawotor

    (University of Professional Studies, Accra
    University of Ghana Business School)

  • Godfred Alufar Bokpin

    (University of Ghana Business School)

  • Patrick O. Asuming

    (University of Ghana Business School)

  • Kofi A. Amoateng

    (North Carolina Central University)

Abstract

African countries quite often experience weather-related events as a result of climate variabilities. In this study, we investigate the effects of climate change and the incidence of extreme weather events on fiscal balance and the broad implications for fiscal policy formulation in Africa. We employ the system GMM, fixed-effects and random-effects estimation strategies over the period 1990–2017. We find that increases in temperature change anomaly which implies a warmer climate in a meteorological year worsens fiscal balance in Africa. Our findings also reveal that weather-related events may have a significant impact on fiscal balance, if the damage caused is large and consequential. Furthermore, African countries with relatively strong institutions and adaptive capacities tend to modulate the impact of temperature change anomaly and extreme weather events on fiscal balance. We forecast that the frequent incidence of climatic disruptions and extreme weather events which are considered as external shocks may toughen the fiscal consolidation efforts and debt sustainability measures of some African governments.

Suggested Citation

  • Mark Edem Kunawotor & Godfred Alufar Bokpin & Patrick O. Asuming & Kofi A. Amoateng, 2022. "The implications of climate change and extreme weather events for fiscal balance and fiscal policy in Africa," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 24(2), pages 470-492, December.
    • Handle: RePEc:spr:jsecdv:v:24:y:2022:i:2:d:10.1007_s40847-022-00180-6
    DOI: 10.1007/s40847-022-00180-6
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    More about this item

    Keywords

    Climate change; Extreme weather events; Fiscal balance; Institutions; Africa;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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