The impact of economic and financial development on environmental degradation. Issue 4 (5th October 2015)

• Record Type: Journal Article
• Authors: Nasreen, Samia; Anwar, Sofia
• Is Part Of: Studies in economics and finance. Volume 32:Issue 4(2015)
• Page Start: 485
• Page End: 502
• Publication Date: 2015-10-05
• Subjects: Economics -- Periodicals; Finance -- Periodicals; 330
• DOI: 10.1108/SEF-07-2013-0105
• Languages: English
• ISSNs: 1086-7376

Abstract

<abstract> <title> <x content-type="archive" xml:space="preserve">Abstract</x> </title> <sec> <title content-type="abstract-heading">Purpose</title> <p> – The purpose of this study is to validate the impact of economic and financial development along with energy consumption on environmental degradation using dynamic panel data models for the period 1980-2010. The study uses three sub-panels constructed on the basis of income level to make panel data analysis more meaningful. </p> </sec> <sec> <title content-type="abstract-heading">Design/methodology/approach</title> <p> – Larsson <italic>et al.</italic> panel cointegration technique, fully modified ordinary least squares and vector error correction model causality analysis are applied for empirical estimation. </p> </sec> <sec> <title content-type="abstract-heading">Findings</title> <p> – Main empirical findings demonstrate that financial development reduces environmental degradation in the high-income panel and increases environmental degradation in the middle- and low-income panels. Hypothesis of the environmental Kuznets curve is accepted in all income panels. Granger causality results show the evidence of bidirectional causality between financial development and CO<sub>2</sub> emission in the high-income panel, and unidirectional causality from financial development to CO<sub>2</sub> emission in the middle- and low-income panels. </p> </sec> <sec> <title content-type="abstract-heading">Originality/value</title> <p> – In empirical literature, only a few studies explain the effect of financial development on environment. The present study is an effort to fill this gap by exploring the effect of economic and financial development on environmental degradation.</p> </sec> </abstract>