Navigating SDG 8: Carbon-adjusted trade and cross-border capital movements through economic Co-movements

Abstract

This study systematically explores the role of Cross-Border Capital Flows (CBCM) in the relationship between Economic Co-movement (ECM), and trade harmonization in Africa. Based on bilateral panel data from 2008 to 2022, the Prais-Winsten Regression, Panel Corrected Standard Error (PCSE) model and System Generalized Moment (Sys-GMM) method are used to address the methodological and data processing limitations of existing studies. The results show that: (i) CBCM have a positive impact on trade harmonization adjusted for carbon emissions, indicating that CBCM can promote trade integration among African countries; (ii) ECM has a negative impact on trade harmonization; (iii) CBCM has the potential to mitigate the adverse impact of ECM on trade harmonization. By promoting the capital flows, countries can effectively cope with the challenges brought by ECM and accelerate the achievement of Sustainable Development Goal 8 (SDG-8); (iv) The study further identifies the threshold effect of CBCM in affecting the relationship between ECM and trade harmonization, enriching the existing literature; (v) At the same time, the dynamic causal relationship between ECM, CBCM and trade harmonization is established. The above findings are of great reference value to policymakers, helping to formulate effective strategies to promote carbon-adjusted trade integration and sustainable regional growth, and promote the realization of SDG-8.