Examining the Impact of Financial Development on Carbon Emissions: Insights from Emerging Economies

Umut Halaç, Fatma Dermenci, Seher Gören Yargı and Melis Gultekin
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Umut Halaç: Yaşar Üniversitesi
Fatma Dermenci: Yaşar Üniversitesi
Seher Gören Yargı: Yaşar Üniversitesi
Melis Gultekin: Yaşar Üniversitesi

Istanbul Journal of Economics-Istanbul Iktisat Dergisi, 2025, vol. 75, issue 1, 156-169

Abstract: This study investigates the impact of financial market development on the environmental quality of emerging countries through an analysis of panel data from 21 Emerging Countries covering the period from 2001 to 2023. To accomplish this objective, we constructed stock market-based and banking sectorbased indices to measure the level of financial market development using principal component analysis. We then identified the cross-sectional dependence and employed unit root testing to ensure accurate estimation. By employing a panel ARDL bound test, we demonstrate that financial development positively impacts environmental quality in emerging countries. The findings provide new insights for researchers and policymakers who seek to develop comprehensive energy supply and economic policies to alleviate the adverse effects of pollution.

Keywords: Financial development; Environmental quality; CO2 Emissions; Panel ARDL bound test; Emerging countries (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ist:journl:v:75:y:2025:i:1:p:156-169

DOI: 10.26650/ISTJECON2024-1531009

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