Financial Stability and Environmental Outcomes in Africa: Empirical Evidence

This research analyses the effect of financial stability on environmental degradation in Africa. To do this, the study uses a panel of 47 countries and an empirical approach based on a panel vector autoregressive (PVAR) model. We also use impulse response functions (IRFs), carried out using Monte Carlo simulations, which allow us to observe the short-term and long-term dynamics of the effects of shocks on financial stability and the environment. The results indicate an ambivalent relationship. In some cases, increased financial stability promotes investment in sustainable projects, but it can also encourage harmful activities if regulation is lacking. Finally, economic policy implications emphasize the need to strengthen governance, introduce strict regulations, and promote green and sustainable investment. These measures aim to balance economic development and environmental protection, while adapting financial policies to regional realities to ensure inclusive and sustainable growth.