title: Does financial development reduce environmental degradation? Evidence from a panel study of 129 countries.
abstract: The purpose of this study is to explore the effect of financial development on CO2 emission in 129 countries classified by the income level. A panel CO2 emission model using urbanisation, GDP growth, trade openness, petroleum consumption and financial development variables that are major determinants of CO2 emission was constructed for the 1980-2011 period. The results revealed that the variables are cointegrated based on the Pedroni cointegration test. The dynamic ordinary least squares (OLS) and the Granger causality test results also show that financial development can improve environmental quality in the short run and long run due to its negative effect on CO2 emission. The rest of the determinants, especially petroleum consumption, are determined to be the major source of environmental damage in most of the income group countries. Based on the results obtained, the investigated countries should provide banking loans to projects and investments that can promote energy savings, energy efficiency and renewable energy to help these countries reduce environmental damage in both the short and long run.
authors.affiliation: Faculty of Business, Multimedia University, 75450, Melaka, Malaysia. usama81za@gmail.com.
authors.forename: Usama
authors.initials: U
authors.lastname: Al-Mulali
authors.affiliation: Centre for Policy Research and International Studies, Universiti Sains Malaysia, 11800 USM, Penang, Malaysia. tcfoon@usm.my.
authors.forename: Chor Foon
authors.initials: CF
authors.lastname: Tang
authors.affiliation: Faculty of Economics and Administrative Sciences, Cag University, 33800, Mersin, Turkey. ilhanozturk@yahoo.com.
authors.forename: Ilhan
authors.initials: I
authors.lastname: Ozturk
mesh_terms: D002245:Carbon Dioxide / Q000032:analysis; D003247:Conservation of Natural Resources; D019049:Developed Countries; D003906:Developing Countries; D017752:Greenhouse Effect; D006801:Humans; D059205:Renewable Energy / Q000191:economics / Q000331:legislation & jurisprudence*; D014507:Urbanization
chemical_list: D002245:Carbon Dioxide
keywords: CO2 emission; Financial development; GDP growth; Petroleum consumption; Trade openness; Urbanisation