Document Type : ORIGINAL ARTICLE

Authors

• Somayeh Azami ¹
• Alireza Nokani ²

¹ Razi university

² Razi University

Abstract

Financial development plays an important role in economic development and growth. But the question is what effect does financial development have on the quality of the environment? The purpose of this study is to investigate the effect of different indicators of financial development on carbon dioxide emissions. Considering different financial development indicators, using principal component analysis (PCA), a composite index of financial development is constructed. The biggest role in the construction of the main component is the index of the percentage of bank deposits to GDP. The estimation of linear and non-linear ARDL model shows that renewable energy significantly leads to reduction of emissions and improvement of environmental quality, and Kuznets environmental curve is confirmed in Iran. Also, financial development has a long-run effect on carbon dioxide emissions. The Non-linear ARDL results indicate that the positive shock of financial development leads to a significant increase in carbon dioxide emissions, but the negative shock of financial development does not have a significant effect on carbon dioxide emissions. Therefore, financial development in Iran has not yet led to the achievement of environmentally friendly technologies, and considering the role and importance of financial development in economic growth and development, it is recommended to produce and consume renewable energy along with financial development in Iran to neutralize the effects of The negative environmental impact of financial development should be increased to achieve sustainable development.

Keywords

• Financial Development
• CO2 Emissions
• Sustainable Development
• Non-linear ARDL

Main Subjects

• توسعه مالی