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ABSTRACT
Many past studies have explored the relationships between income and CO2 emissions; however, most have not covered the possible effects of financial indicators on their frameworks. This study investigates the relationships between financial development and environmental degradation in Turkey from 1960 to 2011 using a multivariate framework that focuses on economic growth and fuel consumption as additional determinants of environmental degradation. Because a unit root test indicated that data were not stationary, the Johansen co-integration test was applied, revealing that the variables under investigation are co-integrated in the long run. After establishing the long-run relationship between variables, error correction modeling identified the long-run and short-run coefficients of the variables. The findings show that in the long-run, economic growth has negative and significant effect on carbon emissions (-0.069) while fuel consumption has positive and elastic impact on carbon emissions (2.82). Therefore, the error correction term implies that CO2 moves to its long-run equilibrium level at a speed of adjustment of 16.97% by the contributions of gross domestic product (GDP), fossil fuel consumption and financial development.
Notes
* For counter findings see references 15 and 53.
Additional information
Notes on contributors
Korhan K. Gokmenoglu
Dr. Korhan Gokmenoglu is an associate professor in the department of banking and finance of Eastern Mediterranean University. He has attended various universities as a student or scholar including Middle East Technical University (Turkey), Brandeis University (U.S.), ESSEC (France), University of California San Diego (U.S.). His Ph.D. is in the field of macroeconomics. He has published many papers in international journals on energy economics. His fields of interest are environmental degradation, renewable energy, energy policy, and energy-growth nexus. E-mail: [email protected].