title: Is CO2emission a side effect of financial development? An empirical analysis for China.
abstract: Based on panel data for 29 Chinese provinces from 1995 to 2012, this paper explores the relationship between financial development and environmental quality in China. A comprehensive framework is utilized to estimate both the direct and indirect effects of financial development on CO2emissions in China using a carefully designed two-stage regression model. The first-difference and orthogonal-deviation Generalized Method of Moments (GMM) methods are used to control for potential endogeneity and introduce dynamics. To ensure the robustness of the estimations, two indicators measuring financial development-financial depth and financial efficiency-are used. The empirical results indicate that the direct effects of financial depth and financial efficiency on environmental quality are positive and negative, respectively. The indirect effects of both indicators are U shaped and dominate the shape of the total effects. These findings suggest that the influences of the financial development on environment depend on the level of economic development. At the early stage of economic growth, financial development is environmentally friendly. When the economy is highly developed, a higher level of financial development is harmful to the environmental quality.
authors.affiliation: Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China. haoyuking@gmail.com.|School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China. haoyuking@gmail.com.|Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, 100081, China. haoyuking@gmail.com.
authors.forename: Yu
authors.initials: Y
authors.lastname: Hao
authors.affiliation: Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China.|School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China.|Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, 100081, China.
authors.forename: Zong-Yong
authors.initials: ZY
authors.lastname: Zhang
authors.affiliation: Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China.|School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China.|Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, 100081, China.
authors.forename: Hua
authors.initials: H
authors.lastname: Liao
authors.affiliation: Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China.|School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China.|Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, 100081, China.
authors.forename: Yi-Ming
authors.initials: YM
authors.lastname: Wei
authors.affiliation: School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China.
authors.forename: Shuo
authors.initials: S
authors.lastname: Wang
mesh_terms: D000393:Air Pollutants / Q000032:analysis*; D002245:Carbon Dioxide / Q000032:analysis*; D002681:China; D057217:Economic Development; D004777:Environment
chemical_list: D000393:Air Pollutants; D002245:Carbon Dioxide
keywords: China; Environmental quality; Financial development; Provincial panel data