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Influence of Financial Development on Environmental Quality: Research Results from Developing Countries

Author

Listed:
  • Yen Nguyen

    (Faculty of Finance, Ho Chi Minh University of Banking, Vietnam)

  • Son Le

    (Ho Chi Minh University of Banking, Vietnam)

  • Nam Ngo

    (Faculty of Finance, Ho Chi Minh University of Banking, Vietnam)

  • Huyen Nguyen

    (Faculty of Finance, Ho Chi Minh University of Banking, Vietnam)

Abstract

This study provides evidence supporting the hypothesis that financial development reduces environmental pollution in developing countries. using an annual dataset of carbon emissions, financial development, and other factors from 1990 to 2020, with the GMM approach, We find that the more developed the financial system, the more advantageous it is for the environment. This conclusion is strengthened when particular facets of financial development are taken into account. Moreover, the impact is also influenced by the countries' wealth levels, in which countries with high average incomes have financial development that has an impact on reducing environmental pollution and the opposite result when viewed. considered in low-middle-income countries. Finally, we offer some policy recommendations regarding financial development to enhance its efficacy in maintaining environmental quality.

Suggested Citation

  • Yen Nguyen & Son Le & Nam Ngo & Huyen Nguyen, 2024. "Influence of Financial Development on Environmental Quality: Research Results from Developing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 93-101, May.
    • Handle: RePEc:eco:journ2:2024-03-10
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    References listed on IDEAS

    as
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    3. Yilmaz Bayar & Laura Diaconu (Maxim) & Andrei Maxim, 2020. "Financial Development and CO 2 Emissions in Post-Transition European Union Countries," Sustainability, MDPI, vol. 12(7), pages 1-15, March.
    4. Brännlund, Runar & Ghalwash, Tarek, 2008. "The income-pollution relationship and the role of income distribution: An analysis of Swedish household data," Resource and Energy Economics, Elsevier, vol. 30(3), pages 369-387, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Environmental Quality; Financial Development; Inverted U-shape; Semi-parametric Test; System GMM;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F18 - International Economics - - Trade - - - Trade and Environment
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • 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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