Financial System Development and Environmental Quality: A System-GMM Dynamic Panel Analysis: FINANCIAL SYSTEM DEVELOPMENT AND ENVIRONMENTAL QUALITY

Wafa Ghardallou; Layla Abaalkhail

doi:10.56042/jsir.v83i7.7776

Authors

Wafa Ghardallou Department of Accounting, College of Business Administration, Princess Nourah bint Abdulrahman University, P.O. Box 84428, Riyadh 11671, Saudi Arabia
Layla Abaalkhail Department of Accounting, College of Business Administration, Princess Nourah bint Abdulrahman University, P.O. Box 84428, Riyadh 11671, Saudi Arabia

DOI:

https://doi.org/10.56042/jsir.v83i7.7776

Keywords:

Carbon emission, Dynamic panel, Financial development, GCC countries, Non-linearity

Abstract

The connection between financial development and carbon emissions is intricate, considering both theoretical frameworks and empirical evidence. Consequently, this study seeks to reassess the relationship between these variables in Gulf Cooperation Council (GCC) countries from 2010 to 2020, employing a dynamic GMM approach. Findings affirm the presence of a nonlinear relationship between financial development and environmental pollution. They specifically indicate that banking industry and financial markets have a twofold influence on environmental quality, encompassing both detrimental and beneficial outcomes. Results indicate that a more developed financial system decreases pollution emissions in GCC countries. The results hold noteworthy policy implications for GCC countries as they work towards achieving their goals related to the establishment of a low-carbon economy.