How does financial development alleviate pollutant emissions in China? A spatial regression analysis

Wang, Xing; Zhou, Dequn; Telli, Şahin

How does financial development alleviate pollutant emissions in China? A spatial regression analysis

2022

Wang, Xing | Zhou, Dequn | Telli, Şahin

Assessing the environmental effects of financial development has an important theoretical and practical reference for the government to achieve the goal of sustainable development. Financial development is affected dramatically by the real economy and typically shows nonlinear characteristics. This study aims to investigate the nonlinearity between financial development and pollutant emissions while considering the various stages of financial development among regions. Also, the spatial transmission mechanism between financial development and pollutant emissions is analyzed theoretically. Industrial sulfur dioxide ([Formula: see text]) and solid waste (SW) emissions are used to quantify pollutant emissions in China. The results show a positive spatial spillover effect on pollutant emissions across various regions. Moreover, a region’s pollutant emissions can be influenced by the financial development of its surrounding regions, suggesting that financial development reduces [Formula: see text] emissions in a particular region, but it significantly increases [Formula: see text] emissions in surrounding regions, indicating a strong spillover effect. However, financial development significantly decreases SW emissions of a particular region but does not exert a significant impact on its surrounding regions, implying a weak spillover effect. Our results reveal that whereas the relationship of financial development with [Formula: see text] and SW emissions shows a significant U-shaped pattern, that of economic growth exhibit a significant inverted U-shaped pattern. The investigation can help in designing appropriate environmental policies for promoting financial development.

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