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

Mark Edem Kunawotor (), Godfred Alufar Bokpin, Patrick Asuming () and Kofi A. Amoateng
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Mark Edem Kunawotor: University of Professional Studies, Accra
Godfred Alufar Bokpin: University of Ghana Business School
Kofi A. Amoateng: North Carolina Central University

Journal of Social and Economic Development, 2022, vol. 24, issue 2, No 12, 470-492

Abstract: 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.

Keywords: Climate change; Extreme weather events; Fiscal balance; Institutions; Africa (search for similar items in EconPapers)
JEL-codes: H61 H68 Q51 Q54 Q58 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s40847-022-00180-6

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