The impact of financial development on accelerating the environmental degradation in Bangladesh

Abstract

Purpose. To examine long-run and short-run effects of industrial financial development on carbon emissions in Bangladesh. Methodology. The auto-regressive distributed lag model was implemented on the data collected from 1976 to 2020 to exhibit cointegration in regression form. Traditional unit roots as well as the Zivot-Andrews structural break test was conducted for investigating a significant single-break. The auto-regressive distributed lag model (ARDL) model approved long-run cointegration having a structural break in this study. Findings. The results conclude that energy consumption triggers carbon emissions with a significant effect on short and long-run models but financial development has no significant effect on environmental degradation. A considerable U-shape Environmental Kuznets Curve hypothesis is observed at the nexus of carbon emissions and economic growth. Originality. The current study proposed to contribute to the existing literature by assessing the effects of financial development, economic growth, and energy consumption on environmental degradation in Bangladesh using modern econometric methodologies. Practical value. The results obtained will be useful to scientists, economists and practitioners dealing with economic and environmental development of different industries.