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CO2 emissions and financial development: evidence from the United Arab Emirates based on an ARDL approach

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  • Diallo, Abdoulaye Kindy
  • Masih, Mansur

Abstract

This paper explores the influence of economic and financial development on carbon emissions in the United Arab Emirates. The study uses the ARDL approach in order to investigate the long run relationship between carbon emissions and a set of economic and financial variables. The long-run and short-run Granger-causal directions are captured through the Error Correction Model (ECM). In order to determine the relative contributions of economic and financial variables to the evolution of per capita carbon emissions, variance decomposition is used. The period considered for the purpose of this study is the full sample (1975–2013). To the best of our knowledge there is no study in this kind focusing only on the United Arab Emirates. Hence we are attempting an humble contribution with this regards. The findings tend to suggest that there is a decline of CO2 emissions in the long run. Also, considering the error correction model output, we can argue that the financial variables, especially the domestic credit to private sector, have an impact in CO2 emissions. This finding is in line with that of Shahbaz et al. (2013) who found out through two different studies (South Africa and Malaysia) that private sector credit had a reducing impact on CO2 emissions.

Suggested Citation

  • Diallo, Abdoulaye Kindy & Masih, Mansur, 2017. "CO2 emissions and financial development: evidence from the United Arab Emirates based on an ARDL approach," MPRA Paper 82054, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82054
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    References listed on IDEAS

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    9. Shahbaz, Muhammad & Solarin, Sakiru Adebola & Mahmood, Haider & Arouri, Mohamed, 2013. "Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis," Economic Modelling, Elsevier, vol. 35(C), pages 145-152.
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    Cited by:

    1. Aamir Inam Bhutta & Muhammad Rizwan Ullah & Jahanzaib Sultan & Ahsan Riaz & Muhammad Fayyaz Sheikh, 2022. "Impact of Green Energy Production, Green Innovation, Financial Development on Environment Quality: A Role of Country Governance in Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 316-326.
    2. Kais Saidi & Mohammad Mafizur Rahman, 2021. "The link between environmental quality, economic growth, and energy use: new evidence from five OPEC countries," Environment Systems and Decisions, Springer, vol. 41(1), pages 3-20, March.
    3. Hayat Khan & Liu Weili & Itbar Khan, 2022. "Environmental innovation, trade openness and quality institutions: an integrated investigation about environmental sustainability," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(3), pages 3832-3862, March.
    4. Saida Daly & Nihel Benali & Manal Yagoub, 2022. "Financing Sustainable Development, Which Factors Can Interfere?: Empirical Evidence from Developing Countries," Sustainability, MDPI, vol. 14(15), pages 1-22, August.
    5. Wang, Zhaohua & Pham, Thi Le Hoa & Sun, Kaining & Wang, Bo & Bui, Quocviet & Hashemizadeh, Ali, 2022. "The moderating role of financial development in the renewable energy consumption - CO2 emissions linkage: The case study of Next-11 countries," Energy, Elsevier, vol. 254(PB).
    6. Adedayo Emmanuel LONGE & Tolulope Oluwatosin BOLAJI & Caleb Olugbenga SOYEMI & Emmanuel Olajide ADEBAYO, 2020. "Dynamic Links Between Financial Development and Carbon Emission in Nigeria," Business & Management Compass, University of Economics Varna, issue 2, pages 214-229.

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    More about this item

    Keywords

    CO2 emissions; United Arab Emirates; Financial development; FDI; GDP; VECM ARDL;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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