Evaluation of the Financial Development Effect on Environmental Pollution of the selected Petroleum Exporting Countries with the Emphasis on Good Governance

اقتصاد پولی مالی

Article 5, Volume 25, Issue 16, October 2018, Pages 133-158   

Document Type: پژوهشی

DOI: 10.22067/pm.v25i15.41432

Authors

fatemeh khani^{* 1}; mahmod hoshmand²

¹Mazandaran University

²Ferdowsi University of Mashhad

Abstract

In recent years, global warming has increased with greenhouse gases such as methane, carbon dioxide, water vapor and nitrogen oxide, causing unhealthy changes in the environment. In this regard, this paper consists of five sections. After the introduction in the second part, we describe the studies carried out on the subject of the research. Then, in the third part, the topic is discussed. In the fourth section, the model used and the variables of the model have been introduced and the results of the estimation of the model have been presented. In the fifth part, we have also discussed the conclusion. Empirical studies on the topic of research have been divided into two categories (external studies and internal studies). In each of these divisions, the studies that have examined the impact of financial development on environmental pollution, as well as studies that have examined the role of governance on environmental pollution are mentioned. Since the study of the effect of financial development on the environment has recently been considered, this section is part of a series of studies that refer to the relationship between financial development and the environment, and also based on the few studies that link the financial and environmental development have analyzed the different channels of the impact of financial development on the environment. Since this study is an inter-country study, data panel information in the studied country group (selected countries of the oil exporter) was used during the period 1996-1996. Also, the 16 selected oil exporting countries include Algeria, Bahrain, Ecuador, Egypt, Iran, Jordan, Kuwait, Libya, Nigeria, Oman, Qatar, Saudi Arabia, Syria, UAE, Venezuela and Yemen. Before presenting the results of model estimation, descriptive statistics of the variables used in the model (carbon dioxide emissions, per capita income, per capita energy consumption, good governance index, financial development index) have been presented. The innovation of the present study can be argued that this study, taking into account simultaneously two important variables and the effect of financial and governance development on the environment in one of the models with comprehensive and low probability of error (data panel), and also, by choosing the appropriate country group (which has a very high degree of homogeneity according to the subject matter), it has tried to speak with greater confidence about the effect of financial development on the environment. Based on the estimates of the present research, the coefficients related to economic growth, energy consumption with a positive sign, suggest that there is a direct relationship between these variables and environmental pollution. In other words, economic growth in these countries has been accompanied by further environmental degradation, and excessive consumption of energy in the economic growth process has caused more environmental damage. Now, if economic growth is accompanied by financial development, it can be argued that financial development in the long run will lead to technological advancement, resulting in less energy consumption and less pollution. On the other hand, the coefficient of good governance is negative, indicating that good governance is one of the factors that improve the quality of the environment. Improving the governance index reduces the gap between the people and the state in environmental issues and reduces environmental pollution. In order to develop financial market and reduce environmental pollution it is recommended:
Adoption of appropriate policies for the development of the financial sector and reduction of environmental pollution
Provision of resources for the implementation of environmental protection projects, which are often run by the government and other social and economic institutions and require financing.
Due to the lack of capital in low-quality institutions, the reform of financial and institutional infrastructure in order to attract and inflate capital (by regulating environmental regulations and prioritizing more environmentally friendly technologies) is recommended to these countries so that they improve through the level of financial development.
Policy makers should note that financial sector reforms must be implemented step by step with great care in order to prevent financial instability and its impact on environmental degradation.
The positive relationship between GDP per capita and the per capita GDP of carbon dioxide in the selected countries of the oil exporter can be attributed to the inefficiency of the production sector and the lack of access to advanced technology in this section, given these cases with the advancement of production technology and the modernization of the production sector, it is possible to prevent high pollution from high tech contamination.
A positive relationship between per capita energy consumption and environmental pollution can be partly attributed due to the high energy use in the commercial and home sectors and in transportation, in which energy efficiency is not optimized in these sectors. With this in mind, energy consumption optimization policies and raising the level of people's awareness of environmental hazards can prevent energy consumption from contaminating the environment.

Keywords

Economic Development; environmental pollution; Good governance; the Petroleum Exporting Countries selected; Panel Data

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