Dynamic linkages between financial inclusion and carbon emissions: Evidence from selected OECD countries
Abstract
This study analyzes the dynamic linkages between financial inclusion, energy consumption, and carbon emissions taking corruption, infrastructure, and economic growth as control variables. The data of 23 OECD countries covering the period from 2004 to 2017 have been used. The study develops two indexes with the help of Principal Component Analysis; one for financial inclusion and the other for infrastructure. The study also adopts second generation tests for unit root and cross-sectional dependence. To check long-run linkages, this study uses (Dynamic) Common Correlated Effects Estimator technique, also called CS-ARDL, which provides more reliable results. The results indicate positive connections between financial inclusion, energy consumption and carbon emissions. Corruption, infrastructure and economic growth are highly sensitive to carbon emissions. The study provides important points for pollution control and attaining the targets of sustainable development. Efforts are needed on government level to align the financial inclusion targets with energy usage behavior and environmental policies.