The Moderating Role of Informal Economic Activities on CO2 Emissions: An Empirical Investigation for Turkey

Environmental conservation is a critical global trend. Many countries, especially developed ones, have implemented policies to maintain a clean atmosphere. This research aims to investigate the impact of both the informal and formal economies on Turkey's environmental performance between 1990 and 2020. Advanced econometric techniques were employed to analyze the relationship between CO2 emissions as the dependent variable, and the informal and formal economies as independent variables. The study found that both the informal and formal economies had a positive long-term correlation with CO2 emissions. When the formal and informal economies increased by 1%, CO2 increased by 0.06% and 2.9%, respectively. On the other hand, economies negatively influence environmental quality, as evidenced by the ARDL model, ARDL bound test, FMOLS model, and DOLS model. Additionally, the study established that there are informal and formal economies a causal relationship to CO2 emissions. Policymakers should take into account the consequences of this study when formulating policies. Sustainable growth necessitates giving continual production and usage top attention. The government has to increase financial planning, public finance management, supervision, and assessment in order to convert natural resources into created capital and non-human value.