Environmental Degradation and Financial Development Nexus in BRICS PLUS Countries: Do Financial Development Drivers Make a Difference?

Dhouha Dridi (), Radhouane Hasni () and Montassar KahiA ()
Additional contact information
Dhouha Dridi: Univ. Manouba
Radhouane Hasni: Univ. Manouba
Montassar KahiA: Qassim University

Journal of the Knowledge Economy, 2025, vol. 16, issue 2, No 155, 10222-10254

Abstract: Abstract The BRICS group is striving to create a new economic and financial paradigm, thereby heightening the importance of financial issues among its members. This group has recently expanded to include new members, some of whom are among the top ten producers of fossil fuels, while others are densely populated. As a result, the BRICS nations face increased challenges and responsibilities regarding environmental degradation. Given this context, it is crucial to evaluate the influence of financial development and its main drivers on environmental outcomes. To achieve this, we have categorized the financial development drivers into three groups: economic, institutional, and productivity-related factors. We then explored how financial development interacts with environmental degradation, with a particular focus on the role of these drivers as effective moderators within the expanded BRICS group. Our analysis uses the cross-sectional autoregressive distributed lag (CS-ARDL) methodology for a period spanning from 2000 to 2021. The empirical results show that in all cases, the interaction between financial development and its drivers reduces CO2 emissions. This interaction benefits from the direct negative effect of financial development. For instance, the interaction between economic growth or capital formation and financial development improves environmental quality, reversing the initially positive direct effect of these factors on emissions. Moreover, for other factors—such as trade openness, government expenditure, control of corruption, human development, and technological innovation—their interaction with financial development creates a synergy that enhances their initially positive direct effect on emission reduction, except for trade openness, which initially had no significant effect. Based on our empirical findings, we have formulated several policy recommendations to address these issues. Graphical Abstract Direct and indirect effects of financial development on CO2 emissions for BRICS PLUS countries in the long run.

Keywords: CO2 emissions; Financial development; Drivers of financial development; Moderating effect; BRICS +; CS-ARDL (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13132-024-02266-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jknowl:v:16:y:2025:i:2:d:10.1007_s13132-024-02266-4

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13132

DOI: 10.1007/s13132-024-02266-4

Access Statistics for this article

Journal of the Knowledge Economy is currently edited by Elias G. Carayannis

More articles in Journal of the Knowledge Economy from Springer, Portland International Center for Management of Engineering and Technology (PICMET)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().