An Empirical Assessment of the Financial Development – Environmental Quality Nexus in the European Union
Our study examines the dynamic relationship between financial development and environmental degradation in the European Union (EU) in a panel VAR (Vector Autoregressive) methodological framework over the period 1996-2018. Panel causality tests and impulse response functions show that financial de...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Editura ASE
2022-08-01
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| Series: | Amfiteatru Economic |
| Subjects: | |
| Online Access: | https://www.amfiteatrueconomic.ro/temp/Article_3131.pdf |
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| Summary: | Our study examines the dynamic relationship between financial development and
environmental degradation in the European Union (EU) in a panel VAR (Vector
Autoregressive) methodological framework over the period 1996-2018. Panel causality tests
and impulse response functions show that financial development contributes to higher carbon
emissions, although this effect is stronger in the short run and weaker in the long run. At the
same time, financial institutions development is the major contributor to fostering increased
environmental degradation instead of financial markets, which points towards an engagement
of financial institutions towards offering financial products that led to environmental
degradation and/or lagging financial markets in terms of promoting environmentally-related
securities and ESG principles. By providing new insights into the relationship between
financial development and carbon emissions, we hope to assist EU policymakers and
businesses in reconsidering the role of financial development as an effective means of
decreasing environmental degradation in the region. |
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| ISSN: | 1582-9146 2247-9104 |