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Financial market development and carbon emissions: The transmission mechanisms and the role of political corruption

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  • Topcu, Mert

Abstract

This study suggests an indirect effect of the financial markets on the environment and explores the transmission mechanisms through which financial market development affects carbon emissions in China. We identify three key mechanisms: i) sustainability, ii) production, and iii) consumption. Our results document that the sustainability mechanism helps mitigate emissions whereas the production mechanism triggers environmental degradation, and the impact of the latter is greater than the former in magnitude. However, once the negative externality of political corruption on financial market development is considered, the beneficial environmental effect dominates the degradation effect.

Suggested Citation

  • Topcu, Mert, 2024. "Financial market development and carbon emissions: The transmission mechanisms and the role of political corruption," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323010887
    DOI: 10.1016/j.frl.2023.104716
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    Keywords

    Financial market development; Carbon emissions;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • 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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