Exploring the Relationships among Institutional Quality, Financial Development, and Environmental Pollution in Developing Countries
DOI:
https://doi.org/10.22452/IJIE.vol18no2.3Keywords:
Financial development, Institutional quality, Environmental pollution, GMM methodology, Carbon emissionsAbstract
Developing countries are heading towards economic prosperity; however,
development also increases carbon emissions and environmental pollution. It is therefore
essential to identify the factors that affect carbon emissions to safeguard the environment.
This study examines the impact of financial development and institutional quality on
carbon dioxide emissions in developing countries. In addition, we investigate the role of
institutional quality in financial development, or the CO2 nexus. We use panel data from
1990 to 2021 and employ the GMM method to assess this relationship. The empirical
findings reveal that financial development improves environmental quality by reducing
CO2. Furthermore, institutional quality catalyses greater reductions in environmental
pollution as countries increase financial development. Based on these findings, developing
economies should promote environmental sustainability by using financial resources
efficiently and improving institutional quality.
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