The nexus between economic growth, financial development, trade openness, and CO2 emissions in European countries

By Lamia Jamel, S. Maktouf. 2017

183 citations recorded by the source corpus.

Abstract In this paper, we empirically investigate the causal nexus between economic growth (GDP), CO2 emissions (environmental degradation), financial development, and trade openness using the ordinary least squares technique for a yearly panel data of 40 European economies, during the period of study from 1985 to 2014. To examine this causal link, we utilize the Cobb–Douglas production function. The empirical findings point to a bidirectional Granger causal linkage among GDP and pollution, GDP and financial sector development, GDP and trade openness, financial sector development and trade openness, and trade openness and pollution in the case of European economies. From the causal link between GDP and environmental pollutants, we validate the existence/confirm the validity of the environmental Kuznets curve hypothesis. Also, we confirm/bear out the feedback suggestion of the bidirectional causality among trade openness and financial sector development. Besides, we find the neutrality hypothesis linking carbon emissions and financial sector development inflows. We find the presence of the bidirectional nexus between GDP and financial sector development and among GDP and trade openness in the European economies. Finally, panel causality verifies that bidirectional causal connection is found between economic growth, environmental degradation (CO2), financial development, and trade openness.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/7959559096172ac54ce975a2eb5129743b6dd518

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Citations in the corpus

Environmental regulations an option: Asymmetry effect of environmental regulations on carbon emissions using non-linear ARDL (2018, background): “…and Lin 2012; Wang et al. 2011; Xu et al. 2012; Pao, Fu, and Tseng 2012; Li et al. 2017; Diallo and Masih 2017; Dar and Asif 2018; Jalil and Feridun 2011; Xing, Jiang, and Ma 2017; Zhang 2011; Jamel and Maktouf 2017; Gokmenoglu, Ozatac, and Eren 2015; Boutabba 2014; Charfeddine and Khediri 2016).”
Does financial development mitigate carbon emissions? Evidence from heterogeneous financial economies (2020, background): “Similarly, Jamel, Maktouf, and Charfeddine (2017) employed OLS and causality analysis to investigate the effect of financial development on carbon emissions in 40 European countries and found that financial development (domestic credit provided by banks to private sectors) has no causal impact on…”
Does the inflow of remittances cause environmental degradation? Empirical evidence from China (2019, background): “These studies include (Boutabba, 2014; Jamel & Maktouf, 2017; Li, Zhang, & Ma, 2015; Ozturk & Acaravci, 2013; Saboori, Sulaiman, & Mohd, 2012; Zhang, 2011), while some studies found a negative relationship between financial development and CO2 emissions.”
An (a)symmetric analysis of the pollution haven hypothesis in the context of Pakistan: a non-linear approach (2019, background): “Further, connections among trade openness, urbanization, energy, financial development and population growth under the EKC hypothesis have been studied by many researchers; such studies include [23] in the case of China; [24] for Canada; [25] in the case of Malaysia; [26] in the case of Indonesia; [”