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A Time-Varying Analysis between Financial Development and Carbon Emissions: Evidence from the MINT countries

Author

Listed:
  • Tomiwa Sunday Adebayo
  • Seyi Saint Akadiri
  • Ilham Haouas
  • Husam Rjoub

Abstract

Since the global economic crisis, researchers and policymakers have paid close attention to the carbon emissions and financial development interrelationship, and some researchers believe that financial development can aid in abating the emissions of carbon. Thus, the objective of this study is to analysis the impacts of financial development of the MINT countries (Mexico, Indonesia, Nigeria and Turkey) on their CO 2 emissions year on year via historical data covering the period 1969–2019. The full-sample bootstrap non-Granger causality test outcomes for Mexico and Turkey reveal that there is a one-way causal association from financial development to CO 2 emissions. Short and long-run instability is shown through a range of parameter constancy tests utilized to investigate the stability of the estimated vector autoregressive models. This implies that the full-sample causality tests are inadequate, necessitating the use of a time-varying (bootstrap) rolling-window technique to address parameter non-constancy and prevent pre-test distortion; therefore, this research uses rolling-window bootstrap estimation. Empirical results from the rolling-window bootstrap estimation show that the nexus between financial development and carbon emissions is date-stamped. These outcomes indicate that significant feedback causal associations exist between financial development and CO 2 emissions in sub-sampled periods in the MINT nations. In addition, we observe emission-decreasing and emission-increasing effects of financial development in the sampled countries across period. One of the study policy recommendations is that policymakers in these nations through monetary authority should mop-up financial resources from institutions showing emission-increasing tendencies to institutions and/or sectors with emission-reducing tendencies.

Suggested Citation

  • Tomiwa Sunday Adebayo & Seyi Saint Akadiri & Ilham Haouas & Husam Rjoub, 2023. "A Time-Varying Analysis between Financial Development and Carbon Emissions: Evidence from the MINT countries," Energy & Environment, , vol. 34(5), pages 1207-1227, August.
    • Handle: RePEc:sae:engenv:v:34:y:2023:i:5:p:1207-1227
    DOI: 10.1177/0958305X221082092
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