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The impact of economic and financial development on environmental degradation: An empirical assessment of EKC hypothesis

Samia Nasreen and Sofia Anwar ()

Studies in Economics and Finance, 2015, vol. 32, issue 4, 485-502

Abstract: Purpose - – The purpose of this study is to validate the impact of economic and financial development along with energy consumption on environmental degradation using dynamic panel data models for the period 1980-2010. The study uses three sub-panels constructed on the basis of income level to make panel data analysis more meaningful. Design/methodology/approach - – Larsson Findings - – Main empirical findings demonstrate that financial development reduces environmental degradation in the high-income panel and increases environmental degradation in the middle- and low-income panels. Hypothesis of the environmental Kuznets curve is accepted in all income panels. Granger causality results show the evidence of bidirectional causality between financial development and CO Originality/value - – In empirical literature, only a few studies explain the effect of financial development on environment. The present study is an effort to fill this gap by exploring the effect of economic and financial development on environmental degradation.

Keywords: CO; Energy consumption; Economic growth; Financial development (search for similar items in EconPapers)
Date: 2015
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