The financial development-environmental degradation nexus in the United Arab Emirates: the importance of growth, globalization and structural breaks

• Published in: Environmental science and pollution research international Vol. 27; no. 10; pp. 10685 - 10699
• Main Authors: Shahbaz, Muhammad, Haouas, Ilham, Sohag, Kazi, Ozturk, Ilhan
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer Berlin Heidelberg 01-04-2020; Springer Nature B.V
• Subjects: Accounting; Aquatic Pollution; Atmospheric Protection/Air Quality Control/Air Pollution; Carbon dioxide; Carbon dioxide emissions; Cointegration analysis; Earth and Environmental Science; Economic development; Economic growth; Economics; Ecotoxicology; Electricity; Electricity consumption; Empirical analysis; Environment; Environmental Chemistry; Environmental degradation; Environmental Health; Environmental quality; Environmental science; Globalization; Research Article; Time series; Waste Water Technology; Water Management; Water Pollution Control; United Arab Emirates; Environment; Electricity; Growth; Globalization; Financial development
• ISSN: 0944-1344; 1614-7499
• DOI: 10.1007/s11356-019-07085-8

This article revisits the nexus between financial development and environmental degradation by incorporating economic growth, electricity consumption and economic globalization in the CO
2
emissions function for the period 1975Q
I
–2014Q
IV
in the United Arab Emirates. We apply structural break and cointegration tests to examine unit root and cointegration between the variables. Further, the article also uses the Toda-Yamamoto causality test to investigate the causal relationship between the variables and tests the linkages of the robustness of causality by following the innovative accounting approach. Our empirical analysis shows cointegration between the series. Financial development increases CO
2
emissions. Economic growth is positively linked with environmental degradation. Electricity consumption improves environmental quality. Economic globalization affects CO
2
emissions negatively. The relationship between financial development and CO
2
emissions is U-shaped and inverted N-shaped. Further, financial development leads to environmental degradation, and environmental degradation in turn leads to financial development in the Granger sense.