Navigating the impact of remittances on environmental quality in Africa: The crucial role of institutional quality

Abstract

The Sub-Saharan African (SSA) region remains the world's largest recipient of remittances. Due to growing concerns over climate change issues, recent studies have examined how these financial flows have affected environmental quality. Sundry variables were controlled in such studies concerning the remittances-environment nexus, including institutional quality. Notwithstanding that remittance and institutional quality are imperative, their combined effect on environmental quality has been overlooked. The present study has inspected how remittances and institutional quality have jointly influenced environmental quality in 44 economies in the SSA region between 2000 and 2022. Using PMG-ARDL analysis, the findings revealed that remittances had a negative long-term impact on environmental quality. Conversely, the study found that institutional quality positively affected the per capita ecological footprints, as measured by the six indicators' average. Furthermore, the results indicated that improvements in institutional quality over time mitigated the adverse impact of remittances on the environment in the sampled SSA countries. Additionally, a threshold level of institutional quality effectively moderates remittances' detrimental effects on environmental quality were identified. Therefore, most regional countries must enhance their institutional quality to mitigate the negative environmental impact of remittances.