Does climate change resilience boost financial stability in sub-Saharan Africa?

Abstract

Financial stability is a key component of the engine of economic growth. However, climate change can lead to financial instability. To counteract these undesirable effects, decision-makers are implementing antidotes through policies of adaptation, mitigation and resilience to climate change. Thus, the objective of this research is to analyze the effect of climate change resilience of Sub-Saharan African (SSA) economies on financial stability using panel data covering a period from 2004 to 2021. Overall, the Dynamic Ordinary Least Squares (DOLS) technique shows that the level of financial stability in SSA and West Africa has improved as a result of the climate change resilience policies implemented. However, the details show that financial stability is boosted by sustainable investments in regional blocks. In addition, it was found that uncontrolled corruption has a negative impact on financial stability in SSA. The results of this research suggest that climate change resilience policies should be accentuated in regional blocs, while some should place greater emphasis on sustainable investments and combating corruption to further boost the financial stability of SSA economies.