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Financial development and macroeconomic sustainability: modeling based on a modified environmental Kuznets curve

Author

Listed:
  • Adel Ben Youssef

    (University Côte d’Azur, France, ISEM)

  • Sabri Boubaker

    (EM Normandie Business School
    Vietnam National University)

  • Anis Omri

    (Qassim University
    University of Carhage)

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.

Suggested Citation

  • Adel Ben Youssef & Sabri Boubaker & Anis Omri, 2020. "Financial development and macroeconomic sustainability: modeling based on a modified environmental Kuznets curve," Climatic Change, Springer, vol. 163(2), pages 767-785, November.
    • Handle: RePEc:spr:climat:v:163:y:2020:i:2:d:10.1007_s10584-020-02914-z
    DOI: 10.1007/s10584-020-02914-z
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