Economic growth, financial development, and trade in nexuses of CO2 emissions for Southeast Asia.

Abstract

In energy economics literature, we found few studies on the association between environmental quality energy consumption and financial development. The current study is an attempt to contribute in literature by examining the link between carbon dioxide (CO2) emissions, financial development, energy consumption, and economic growth, in South East Asian economies for the period 1980-2017 using annual time series data. For empirical analysis, Bound tests for cointegration and error correction approach are used. The estimated results confirm that financial development has positive impact on environmental quality. On the other hand, in the long run, the rise in energy consumption economic growth and trade openness is unfavorable for environment quality. Our results confirm U-shaped relationship between economic growth and environmental quality that is a proof of environmental Kuznets curve (EKC). Additionally, the government needs to design different modes of energy consumption to solve the problem of environmental degradation. Moreover, the major conclusion extends new insight for authority to make a comprehensive trade and financial policies to improve environmental quality.