Green Investment and Economic Growth in Sub-Saharan Africa: Short-Run Costs and Long-Run Gains

This study examines the effect of green investment on economic growth in sub-Saharan Africa (SSA) from 1990 to 2023. Annual panel time series data was utilized, focusing on Green Investment (GIN), Economic Growth (DGDP), Gross Capital Formation (DGCF), Labour Force (LBF), Foreign Direct Investment (FDI) and Carbon Emission (CO2). A second-generation panel stationarity and cross-sectional dependency test was employed to account for spillover effects between economic growth and green investment. The result of the study shows that in the short-run green investments has a significant effect on economic growth, with a coefficient of -17.6 meaning that in an initially green investment will reduce the output due to the cost of transition from carbon to zero carbon sources of energy. In contrast, the long-run results show that green investment positive affects economic growth, with a coefficient of 10.41 due to the decrease in the cost of production as a utilization zero emission sources of energy. Additionally, the Dumitrescu and Hurlin Granger causality test reveals bi-directional causality between green investment and economic growth. Based on the findings, the study recommends that countries should prioritize to enhance both green investment and economic growth in SSA, Improving Access to clean energy, establishing a regional green energy forum that would promote and protect sustainable development initiatives across the region.