FINANCIAL DEVELOPMENT, INCOME, TRADE, AND URBANIZATION ON CO2 EMISSIONS: NEW EVIDENCE FROM KYOTO ANNEX COUNTRIES

Authors

  • Muhammad Rizwan Nazir Scholar at the School of finance of Zhongnan University of Economics and Law
  • Muhammad Imran Nazir Scholar at the School of economics of Huazhong University of Science and Technology
  • Shujahat Haider Hashmi Scholar at the School of economics of Huazhong University of Science and Technology
  • Zeeshan Fareed Scholar at the School of finance of Zhongnan University of Economics and Law

DOI:

https://doi.org/10.24212/2179-3565.2018v9i3p17-37

Keywords:

Financial development, CO2 emissions, EKC hypothesis, Urbanization, Panel data, GMM system, Kyoto Annex countries

Abstract

This study attempts to empirically investigate the impact of financial development, income, trade openness, and urbanization on carbon dioxide (CO2) emissions for the 21 Kyoto Annex countries using a balance panel data and GMM system over the period of 1970-2016. The results show a positive relationship between income and CO2 emissions in long-run. All models support the EKC hypothesis which assumes an inverted U-shaped relationship among income and environmental degradation. Financial development has a long-run negative influence on CO2 emissions, indicating that financial development reduces the environmental degradation. This means that financial development can be used as an implement to keep the degradation environmental clean by presenting financial reforms. The urbanization declines the CO2 emissions; however, it is essential for the policymakers and urban planners in these countries to control the rapid increase in urbanization. The panel causality confirms that bi-directional causal relationship between financial development, CO2 emissions, income, trade openness, and Urbanization in short-run.

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Published

2018-10-26

Issue

Vol. 9 No. 3 (2018): SET ( 2018 )/ FEV( 2019 )

Section

Papers

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