On the asymmetric relationship between stock market development, energy efficiency and environmental quality: A nonlinear analysis

Mayssa Mhadhbi, Mohamed Gallali, Stéphane Goutte and Khaled Guesmi

International Review of Financial Analysis, 2021, vol. 77, issue C

Abstract: It has been widely documented in the literature that financial development drives up the impact of CO2 emissions through increases in real economic activities and the consumption of polluting fossil fuel energy. However, when dealing with stock market development, such upward effects on economic growth, energy efficiency, and carbon emissions seems to give away to a positive impact especially in emerging markets. This paper contributes to this debate by exploring both the symmetric and asymmetric responses of CO2 emission to changes in stock market development indicators. Using both the panel linear and nonlinear ARDL, our results demonstrate the asymmetric effects of stock market development indicator son carbon emissions in the context of emerging markets. In particular, the long-run elasticities results suggest that positive and negative shocks on stock market indicator decreases environmental quality by increasing carbon emissions. Based on these empirical findings, this study offers some crucial policy implications. Especially, policy makers should implement strong environmental policies in emerging markets economies to reduce carbon emissions of industrial companies without significantly affecting the development of financial markets.

Keywords: Stock market development; Carbon emissions; Energy efficiency; Asymmetric relationship; NARDL model (search for similar items in EconPapers)
JEL-codes: E44 F64 G28 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:77:y:2021:i:c:s1057521921001733

DOI: 10.1016/j.irfa.2021.101840

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