The Nexus between Carbon Emissions, Energy Use, Economic Growth and Financial Development: Evidence from Central and Eastern European Countries

Alina Georgiana Manta, Nicoleta Mihaela Florea, Roxana Maria Bădîrcea, Jenica Popescu, Daniel Cîrciumaru and Marius Dalian Doran
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Alina Georgiana Manta: Department of Finance, Banking and Economic Analysis, Faculty of Economics and Business Administration, University of Craiova, 13 A.I. Cuza Street, Craiova 200585, Romania
Nicoleta Mihaela Florea: Department of Finance, Banking and Economic Analysis, Faculty of Economics and Business Administration, University of Craiova, 13 A.I. Cuza Street, Craiova 200585, Romania
Roxana Maria Bădîrcea: Department of Finance, Banking and Economic Analysis, Faculty of Economics and Business Administration, University of Craiova, 13 A.I. Cuza Street, Craiova 200585, Romania
Jenica Popescu: Department of Finance, Banking and Economic Analysis, Faculty of Economics and Business Administration, University of Craiova, 13 A.I. Cuza Street, Craiova 200585, Romania
Daniel Cîrciumaru: Department of Finance, Banking and Economic Analysis, Faculty of Economics and Business Administration, University of Craiova, 13 A.I. Cuza Street, Craiova 200585, Romania
Marius Dalian Doran: Doctoral School of Economic Sciences, Faculty of Economics and Business Administration, University of Craiova, 13 A.I. Cuza Street, Craiova 200585, Romania

Sustainability, 2020, vol. 12, issue 18, 1-21

Abstract: The aim and novelty of this study consist of estimating the nexus between CO 2 (carbon dioxide) emissions, energy use, economic growth, and financial development for ten Central and Eastern European countries (CEEC) over the 2000–2017 period, starting from Environmental Kuznets Curve (EKC) theory. The Fully Modified Ordinary Least Squares (FMOLS) method was used for testing the cointegration relationship. Granger causality estimation based on the Vector Error Correction Model (VECM) and Pairwise Granger causality test were applied to identify the causality relationships between the variables and to identify the direction of causality. The implementation of the tests led to significant conclusions. In the long run, the levels of CO 2 emissions and energy use do not have any influence on economic growth. Furthermore, there is a bidirectional causality among economic growth in terms of GDP and financial development variables. Thus, increasing financial development will generate more CO 2 emissions and more energy use, and increasing economic growth will lead to rising financial development. In the short run, increasing financial development will generate more CO 2 emissions and will lead to increased energy use and economic growth. Also, a bidirectional causality is being revealed between financial development and CO 2 emissions. This indicates that financial development may help to reduce CO 2 emissions.

Keywords: climate change; economic system; fully modified OLS (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:18:p:7747-:d:415960

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