Trade and FDI thresholds of CO2 emissions for a green economy in Sub-Saharan Africa

Arbeitspapier

This research focuses on assessing how improving openness influences CO2 emissions in Sub-Saharan Africa. It is based on 49 countries in SSA for the period 2000-2018 divided into: (i) 44 countries in SSA for the period 2000-2012; and (ii) 49 countries for the period 2006- 2018. Openness is measured in terms of trade and foreign direct investment (FDI) inflows. The empirical evidence is based on the Generalised Method of Moments. The following main findings are established. First, enhancing trade openness has a net positive impact on CO2 emissions, while increasing FDI has a net negative impact. Second, the relationship between CO2 emissions and trade is a Kuznets shape, while the nexus between CO2 emissions and FDI inflows is a U-shape. Third, a minimum trade openness (imports plus exports) threshold of 100 (% of GDP) and 200 (% of GDP) is beneficial in promoting a green economy for the first and second sample, respectively. Fourth, FDI is beneficial for the green economy below critical masses of 28.571 of Net FDI inflows (% of GDP) and 33.333 of net FDI inflows (% of GDP) for first and second samples, respectively. It follows from findings that while FDI can be effectively managed to reduce CO2 emissions, this may not be the case with trade openness because the corresponding thresholds for trade openness are closer to the maximum limit. This study complements the extant literature by providing critical masses of Trade and FDI that are relevant in promoting the green economy in Sub-Saharan Africa.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: AGDI Working Paper ; No. WP/20/072

Classification and Topics

• Classification: Wirtschaft ; Model Evaluation, Validation, and Selection ; Technological Change: Government Policy ; Economic Growth and Aggregate Productivity: General ; Economywide Country Studies: Africa ; Socialist Systems and Transitional Economies: Legal Institutions; Illegal Behavior
• Subject: CO2 emissions ; Economic development ; Africa ; Sustainable development

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Asongu, Simplice ; Odhiambo, Nicholas M.
• Event: Veröffentlichung
• (who): African Governance and Development Institute (AGDI)
• (where): Yaoundé
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/228049
• Last update: 10.03.2025, 11:41 AM CET