Financial development and environmental degradation: insights from European countries

Alexandra Horobet, Magdalena Radulescu, Taoufik Bouraoui, Irina Mnohoghitnei, Daniel Balsalobre-Lorente and Lucian Belascu

Applied Economics, 2025, vol. 57, issue 32, 4679-4694

Abstract: We investigate the relationship between financial development and environmental quality during 1996–2019 in a panel analysis of 40 European countries, of which 28 EU and 12 non-EU member countries. We built four empirical models to check the connection between financial development and environmental degradation while controlling for GDP growth, trade openness, FDI, and energy consumption. We applied the Dynamic Common Correlated Effects (DCCE) estimator because of cross-sectional dependence (CSD) among the panel cross-sections. Our findings report a positive association between financial development and environmental degradation for the entire panel of European countries. The subsequent analysis of sub-groups shows that this is particularly the case for non-EU member countries and countries with a high level of financial development. Furthermore, there is a bidirectional causality between financial development, energy consumption or trade openness, and environmental degradation in European countries.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2024.2364087 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:57:y:2025:i:32:p:4679-4694

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2024.2364087

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().