Financial inclusion and carbon emissions in Asia: Implications for environmental sustainability

Shahzad Hussain, Tanveer Ahmad, Sabeeh Ullah, Ajid Ur Rehman and Syed Jawad Hussain Shahzad

Economic and Political Studies, 2024, vol. 12, issue 1, 88-104

Abstract: This study explores how carbon emissions are affected by financial inclusion. Using a balanced panel data set of 26 Asian countries, we compute a composite index, through the principal component analysis (PCA) technique, of financial inclusion based on a set of attributes related to financial inclusion. Our main analysis also delineates the subsamples of developed and developing Asian economies. The results reveal a long (short)-run positive (negative) impact of financial inclusion on carbon emissions across the Asian countries. This finding is also true for the developed country subsample, implying nonlinearity in short- and long-run relationships. For the developing countries, a more pronounced long-run positive impact compared to developed countries is found. Furthermore, the pairwise causality test results indicate the existence of bi-directional causality between financial inclusion and carbon emissions. These findings have important policy implications, especially in the context of the strategic integration of financial inclusion and climate change strategies.

Date: 2024
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DOI: 10.1080/20954816.2023.2273003

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