The Impact of the Financial Industry and Globalization on Environmental Quality

Abstract

The objectives of this study were to evaluate the impact of financial development, globalization, and pollution in six MENA countries from 1971 to 2015. Many prior studies empirically explored numerous factors determining environmental quality/pollution across the world. As far as the region of North Africa and the Middle East is concerned, the majority of previous studies ignored the combined role of globalization and financial development in predicting environmental quality using carbon emissions (CO2). Furthermore, we aimed to assess the legitimacy of the environmental Kuznets curve (EKC) theory for MENA nations. For this purpose, a feasible generalized least squares (FGLS) estimator was applied. It was found that the development of the financial sector and globalization significantly affected ecological quality. Regressors such as energy use and foreign direct investment (FDI) had an altogether positive effect on natural quality. These empirical discoveries also demonstrate the acceptability of the EKC hypothesis for MENA nations. This study shows that governments in the Middle East and East Africa need to develop and implement appropriate policies to promote renewable energy sources, such as wind, solar, biofuel, and heat production, which help to reduce carbon dioxide emissions and promote sustainable economic development.