Financial development and environmental degradation: Does political regime matter?

The paper examines the determinants of environmental degradation for 26 African countries over the period 1985-2011. Using a wide range of econometric techniques (Chow test, cross-country regressions and the Generalized Method of Moments (GMM)), we find that environmental degradation (measured by CO2 emissions) in 2000-2011 experience a structural change which is far more intense than 1985-1999. Furthermore, cross-country regressions show that economic growth and urbanization are significant determinants of environmental degradation. Financial development, however, is a significant determinant of environmental degradation after accounting for political regime. Finally, the GMM estimator confirms a robust positive link between environmental degradation and economic growth. The policy implications of our findings are discussed in the concluding section. (C) 2018 Elsevier Ltd. All rights reserved.