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Does financial development stimulate environmental sustainability? Evidence from a panel study of 115 countries
Author(s) -
Uddin Mirza Md Moyen
Publication year - 2020
Publication title -
business strategy and the environment
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.123
H-Index - 105
eISSN - 1099-0836
pISSN - 0964-4733
DOI - 10.1002/bse.2591
Subject(s) - kuznets curve , gross domestic product , economics , moderation , panel data , environmental degradation , sustainability , positive relationship , demographic economics , econometrics , macroeconomics , mathematics , statistics , psychology , ecology , social psychology , biology
This paper investigates the moderation effect of financial development (FD) on the environmental Kuznets curve (EKC). Using comprehensive panel data of 115 countries spanning the 1990–2016 period and dividing the countries into different income groups, the researcher found systematic differences in the relationship between significant indicators of environmental degradation and economic growth. More specifically, the interaction effect of FD on the relationship between gross domestic product (GDP) growth and CO 2 emissions are positive; nevertheless, the interaction effect of FD on the relationship between GDP squared and CO 2 emissions become negative for all income groups and therefore supports the EKC. Moreover, the interaction effect of FD is negative on the relationship of GDP with both CH 4 and PM 2.5 emissions in the middle‐income groups, whereas the interaction effect of FD on the relationship between GDP squared and PM 2.5 emissions are negative for the high‐income group. Our results suggest that FD can reduce environmental degradation without adversely impacting on growth.