The role of financial development on carbon emissions: a meta regression analysis

The study analyzes the role of financial development on CO2 emissions based on the primary studies in the existing literature. However, the heterogeneity in reported effect size estimates of the primary studies complicates to test the competing hypotheses for the role of financial development on CO2 emissions. The paper tries to determine and quantify the representative empirical genuine effect of financial development on CO2 emissions, if any. To address the issue, a meta-regression analysis has been carried out for 275 estimation results from 72 primary studies. We have found a substantial publication selection bias in the literature due to the design characteristics of the primary studies. The results suggest the presence of an authentic positive empirical effect of financial development on CO2 emissions beyond publication selection bias. Hence, financial development leads to environmental degradation. The effect of financial development on carbon emissions changes both in magnitude and direction depending on which financial development indicator is used, which estimation technique is employed, which countries or region are included and which time period is analyzed.