Impacts of financial globalization on CO2 emissions in Asian countries and implications for Vietnam

Abstract

Currently, economies around the world are striving for sustainable development with commitments to ensure environmental quality, while simultaneously experiencing rapid growth in the global financial market. The primary objective of this study was to investigate how financial globalization has influenced CO2 emissions in Asian countries. We utilized secondary data from 39 Asian countries spanning the years 2000 to 2020. Through cross-dependence tests, unit root tests, and panel cointegration analysis, we found that the variables exhibited a random pattern rather than a direct interconnection. Therefore, regression techniques such as POLS (Pooled Ordinary Least Squares), FEM (Fixed Effects Model), and REM (Random Effects Model) were utilized for analysis. The findings revealed an inverted U-shaped relationship between financial globalization and CO2 emissions, suggesting an initial increase in emissions followed by a decline as financial globalization progresses beyond a certain threshold. The Environmental Kuznets Curve (EKC) hypothesis was confirmed, and positive correlations were found between trade openness, urbanization, energy intensity and CO2 emissions. These findings underscore the importance of sustainable financial globalization policies, emphasizing the need for Asian countries, including Vietnam, to balance economic growth with environmental protection by promoting green investments, adopting cleaner technologies and transitioning to renewable energy sources.