Role of financial development, economic growth & foreign direct investment in driving climate change: A case of emerging ASEAN

Friday, September 6 2024
a) Leeds Beckett University, United Kingdom
b) School of Banking, University of Economics Ho Chi Minh City, Viet Nam
c) WHU – Otto Beisheim School of Management, Vallendar, Germany

In the context of remarkable economic growth and financial development in the emerging economies of East Asia, this paper attempts to shed light on the ecological consequences (CO2 emission) of economic growth, foreign direct investment and financial development in the selected ASEAN-5 economies. Drawing on the data from 1982 to 2014, we employed a set of quantitative techniques for panel data analysis which entailed Dynamic Ordinary Least Squares (DOLS) and Fully Modified OLS (FMOLS) approaches. Our findings indicate that financial and economic development, as well as FDI, have a statistically significant long-run co-integrating relationship with environmental degradation (CO2 emissions) in the under analysis economies. It showed that in ASEAN-5 countries, economic growth, financial development and FDI leads to an increase in environmental degradation. The quadratic term for economic growth showed a negative impact on environmental degradation i.e. Environmental Kuznets Curve (EKC). Our key findings manifest and emphasise the importance of appropriate policies for more inclusive economic and financial development and sustainable foreign direct investment which does not impede on the environment.

 

Cite:

Muhammad Ali Nasir, Toan Luu Duc Huynh, Huong Thi Xuan Tram, Role of financial development, economic growth & foreign direct investment in driving climate change: A case of emerging ASEAN, Journal of Environmental Management, Volume 242, 2019, Pages 131-141, ISSN 0301-4797, https://doi.org/10.1016/j.jenvman.2019.03.112

Keyword(s)

ASEAN, CO2 Emissions, DOLS, Economic Growth, Emerging economies, Environmental kuznets curve (ECK), FDI, Financial Development, FMOLS, Pollution heavens hypothesis (PHH)

Author(s)

Muhammad Ali Nasir, Toan Luu Duc Huynh, Huong Thi Xuan Tram

Country(ies)

ASEAN, Vietnam

Publisher

Elsevier

Published Date

DOI

10.1016/j.jenvman.2019.03.112

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