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Financial market development and carbon emissions: The transmission mechanisms and the role of political corruption

Mert Topcu

Finance Research Letters, 2024, vol. 59, issue C

Abstract: This study suggests an indirect effect of the financial markets on the environment and explores the transmission mechanisms through which financial market development affects carbon emissions in China. We identify three key mechanisms: i) sustainability, ii) production, and iii) consumption. Our results document that the sustainability mechanism helps mitigate emissions whereas the production mechanism triggers environmental degradation, and the impact of the latter is greater than the former in magnitude. However, once the negative externality of political corruption on financial market development is considered, the beneficial environmental effect dominates the degradation effect.

Keywords: Financial market development; Carbon emissions (search for similar items in EconPapers)
JEL-codes: D53 Q56 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323010887

DOI: 10.1016/j.frl.2023.104716

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