Testing how financial development led to energy efficiency? Environmental consideration as a mediating concern

This work investigates the relationship of financial development with energy efficiency and economic growth. Due to the coexistence of economic expansion, trade openness, financial development, and urbanization in Indonesia and Turkey, these two countries are considered. Johansen cointegration, erro...

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Bibliographic Details
Published in:Environmental science and pollution research international 2022-02, Vol.29 (10), p.14665-14676
Main Authors: Zhang, Linyun, Huang, Feiming, Lu, Lu, Ni, Xinwen
Format: Article
Language:English
Subjects:
Aquatic Pollution
Atmospheric Protection/Air Quality Control/Air Pollution
Carbon
Carbon Dioxide
Carbon dioxide emissions
Coexistence
Conservation of Energy Resources
Earth and Environmental Science
Economic conditions
Economic Development
Economic factors
Economic growth
Economics
Ecotoxicology
Emissions
Emissions trading
Energy consumption
Energy efficiency
Environment
Environmental Chemistry
Environmental Health
Environmental law
Environmental science
Error correction
Research Article
Urbanization
Waste Water Technology
Water Management
Water Pollution Control
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Summary:This work investigates the relationship of financial development with energy efficiency and economic growth. Due to the coexistence of economic expansion, trade openness, financial development, and urbanization in Indonesia and Turkey, these two countries are considered. Johansen cointegration, error correction, and Granger causality tests are applied to validate the predicted effects of economic activity on the environment. Results show a long-term relationship of Indonesia’s CO 2 emissions with five out of six macroeconomic factors, except for urbanization, which has a detrimental effect on carbon emissions. On the other hand, no cointegration across variables is found in the case of Turkey. However, unidirectional causality is observed from energy consumption and economic growth to economic growth. Furthermore, economic growth, energy consumption, and trade openness have a two-way causal effect on financial development. This work encourages Turkish and Indonesian policymakers and regulators to strengthen environmental laws. It also encourages other economies and governments to conduct similar analyses and determine the best course of action.
ISSN:0944-1344
1614-7499
DOI:10.1007/s11356-021-16642-z