Economic Growth and Environmental Quality: Analysis of Government Expenditure and the Causal Effect

Mary Donkor (), Yusheng Kong (), Emmanuel Kwaku Manu, Albert Henry Ntarmah and Florence Appiah-Twum
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Mary Donkor: School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Jingkou District, Zhenjiang 212013, China
Yusheng Kong: School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Jingkou District, Zhenjiang 212013, China
Emmanuel Kwaku Manu: School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Jingkou District, Zhenjiang 212013, China
Albert Henry Ntarmah: School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Jingkou District, Zhenjiang 212013, China
Florence Appiah-Twum: School of Management, Jiangsu University, 301 Xuefu Road, Jingkou District, Zhenjiang 212013, China

IJERPH, 2022, vol. 19, issue 17, 1-23

Abstract: Environmental expenditures (EX) are made by the government and industries which are either long-term or short-term investments. The principal target of EX is to eliminate environmental hazards, promote sustainable natural resources, and improve environmental quality (EQ). Thus, this study looks at the impact of economic growth (EG), and government finance expenditure (GEX) on EQ in Northern Africa and Southern Africa (NASA) republics from 2000–2016. The panel quantile regression (PQR) and panel vector autoregressive (PVAR) model in a generalized method of moment framework (GMM) were employed as a framework. The PQR results show that; (i) In Northern republics, GEX had a significant positive effect on EQ at 25%, 50%, and 75% quantiles levels. (ii) In the Southern republics, GEX had a significant negative impact on EQ at 25%. Moreover, the PVAR through the GMM established that EG and GEX are significantly positive while the parameter for CO 2 is insignificant and negative in the North. However, in the South, GEX and CO 2 were statistically significant, while EG positively impacts EQ. Lastly, the granger causality report in North indicates uni-directional causation running from LNGEX → LNGDPpc, LNCO 2 → LNGDPpc, LNFF → LNGEX, and LNFDI → LNGEX. Similarly, there is uni-directional causation in South republics from LNGEX → LNGDPpc, LNCO 2 → LNGEX, and LNFDI → LNGEX.

Keywords: economic growth; government finance expenditure; environmental quality; panel quantile regression; NASA republics (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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