Towards decarbonization in Ghana: Is financial development a panacea? Evidence from the rolling window bootstrap Granger causality test Provisionally Accepted

Felix Nutakor¹ Michael K. Minlah^{1, 2} Philipine N. Ganyoh³ Benjamin Sanful⁴ Jinke Li^1*

• ¹Qingdao University, China
• ²University of Professional Studies, Ghana
• ³Ghana Institute of Management and Public Administration (GIMPA), Ghana
• ⁴Liaoning University, China

This research paper examines the effect of financial development and CO2 emissions in Ghana between 1960 and 2021, using the Bootstrap Rolling window bootstrap Granger causality test. The methodology, examining the impact of financial development on carbon dioxide emissions within sub-samples of the full sample employed, also allows feedback from carbon dioxide emissions to financial development. The study sought to investigate whether financial development can serve as a panacea to the menace of rising carbon dioxide emissions in Ghana. The study's findings reveal that financial development positively influences CO2 emissions during the sample periods in which it causes Granger causality to CO2 emissions. Additionally, significant feedback from CO2 emissions to financial development is observed in the sub-samples where CO2 emissions cause Granger causality to financial development. The results reveal that financial development will aggravate carbon dioxide emissions in Ghana without the appropriate policy frameworks in place. Proceeding from the study results, the study recommends financial incentives, establishment of green investment funds, carbon pricing mechanisms such as carbon taxes or cap-and-trade systems, subsidies, and favorable regulatory frameworks to promote adopting and expanding renewable energy sources, which will consequently CO2 ameliorate emissions.