Monetary Policy, Renewable Energy Consumption, And Carbon Emissions Dynamics In Sub- Sahara Africa

Abstract

This study investigates the dynamic relationship between monetary policy, renewable energy consumption, and carbon emissions in Sub-Saharan Africa from 1990 to 2024. Using annual panel data and a pooled mean group autoregressive distributed lag (PMG/ARDL) framework, the analysis examined both short-run dynamics and long-run equilibrium relationships while accounting for cross-country heterogeneity. The empirical results indicated the existence of a stable long-run relationship among monetary policy, renewable energy consumption, and carbon emissions. Renewable energy consumption exhibited a positive long-run association with monetary aggregates, suggesting that sustained renewable energy development is linked to financial expansion over time. In contrast, carbon emissions do not display a significant long-run relationship with monetary policy, indicating limited environmental responsiveness within conventional monetary frameworks. Short-run effects are largely insignificant, highlighting the gradual nature of monetary transmission in the region. Overall, the findings suggested that monetary policy alone has limited capacity to influence environmental outcomes in Sub-Saharan Africa and underscore the importance of complementary fiscal and regulatory measures to support the energy transition and emissions mitigation.