Nexus between Economic Openness, Money Supply, Environmental Degradation and Economic Growth New Evidence from the MENA Region: A CS-ARDL Analysis

Abstract

This study explores the impact of economic (economic openness, credit, money supply) and environmental indicators (CO2 emissions) on economic growth in Middle East and North Africa (MENA) countries, considering the challenges posed by climate change. Through a theoretical process of transition to a monetary policy that incorporates these issues, the study examines potential strategies of MENA countries. It analyses empirical approaches to the relationship between climate, productivity, and monetary policy. Empirical results reveal that in the MENA region, CO2 emissions do not significantly impact long-term growth, mainly due to the high dependence on extractive industries. However, this dynamic could conceal long-term challenges, particularly in economic diversification and energy transition. Moreover, private credit has a negative effect on growth, while the money supply has a significant positive impact. Economic openness spurs growth, but its effects are less pronounced. The results call for prudent credit management and tighter regulation while underscoring the importance of energy transition and diversification-orientated economic policies to ensure long-term sustainable and environmentally sound growth.