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Does financial openness cause the intensification of environmental degradation? New evidence from Latin American and Caribbean countries

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Listed:
  • Matheus Koengkan

    (University of Évora, Colégio do Espírito Santo)

  • Renato Santiago

    (University of Beira Interior)

  • José Alberto Fuinhas

    (University of Coimbra)

  • António Cardoso Marques

    (University of Beira Interior)

Abstract

The impact of financial openness on environmental degradation, mainly via carbon dioxide emissions, was investigated for a panel of 21 Latin American and Caribbean countries, throughout 35 years (from 1980 to 2014). An autoregressive distributed lag model was used to decompose the total effects of the variables into their short- and long-run components. The results show that financial openness, economic growth, and primary energy consumption increased environmental degradation, both in the short and long run, while renewable energy consumption decreased it. These findings suggest that policymakers should carry out financial reforms focused on sustainable development, as well as support renewable energy projects. Moreover, the results also lead one to believe that these countries’ economic growth strategies should be integrated with the carbon dioxide emissions regulation.

Suggested Citation

  • Matheus Koengkan & Renato Santiago & José Alberto Fuinhas & António Cardoso Marques, 2019. "Does financial openness cause the intensification of environmental degradation? New evidence from Latin American and Caribbean countries," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(4), pages 507-532, October.
    • Handle: RePEc:spr:envpol:v:21:y:2019:i:4:d:10.1007_s10018-019-00240-y
    DOI: 10.1007/s10018-019-00240-y
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    More about this item

    Keywords

    Environmental degradation; Ecological economics; Financial development; Energy economics;
    All these keywords.

    JEL classification:

    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • G1 - Financial Economics - - General Financial Markets
    • N56 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Latin America; Caribbean
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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