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Does financial openness mitigate carbon emissions? Evidence from a cross-country study

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  • Fang, Xiaobo
  • Fu, Dahai
  • Xian, Yushi
  • Zhang, Ying

Abstract

This study empirically investigates the impact of financial openness on carbon emission intensities at the country-level. Utilizing a fixed effects model and a comprehensive dataset across more than 100 countries from 1971 to 2019, we find that financial openness significantly reduces carbon emission intensities. The results are robust to various sensitivity analyses and control for potential endogeneity issues. The analysis of dynamic effects indicates that financial openness has a long-term reducing effect on carbon emissions. We also explore the mechanisms through which financial openness affects carbon emissions, including energy structure transformation and economic transition.

Suggested Citation

  • Fang, Xiaobo & Fu, Dahai & Xian, Yushi & Zhang, Ying, 2025. "Does financial openness mitigate carbon emissions? Evidence from a cross-country study," Finance Research Letters, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001400
    DOI: 10.1016/j.frl.2025.106875
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    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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