Does Financial Development Affect the Emission of CO2 Uniformly Across Economies? Global Evidence From Heterogeneous Analysis

Abstract

The study investigates financial development's heterogeneous impact on emission of CO₂, especially in the pre- and post-global financial crisis phases and analyzes the mediators through which financial development affects the emission of CO₂. Using panel quantile estimation with non-additive fixed effects method, on a comprehensive sample of 125 countries over the period 1991–2015, we find that the overall financial development activities increase the emission of CO₂. However, financial development has a much greater effect on increasing CO₂ emissions in countries with fewer emissions than in those with higher emissions.