The effects of research and development and financial development on CO2 emissions: evidence from selected WAME economies

Kihombo, Shauku; Saud, Shah; Ahmed, Zahoor; Chen, Songsheng

The effects of research and development and financial development on CO2 emissions: evidence from selected WAME economies

2021

Kihombo, Shauku | Saud, Shah | Ahmed, Zahoor | Chen, Songsheng

Earth is in the Anthropocene era and humankind deteriorates the global environment; thus, there is a dire need for sustainable policies at all levels. This study investigates the causal and long-run association between financial development, research and development expenditures, and carbon dioxide emission including energy intensity and income level for selected West Asia and Middle East (WAME) economies along the belt and road. The long-run panel estimation findings reveal that the research and development expenditures (R&D) are negatively associated with environmental degradation, as they significantly mitigate carbon emissions. In contrast, financial development contributes to environmental degradation. The findings validated the environmental Kuznets curve (EKC) phenomenon for the WAME economies considering R&D and financial development. Further, energy intensity exacerbates environmental quality. Additionally, the findings from Dumitrescu-Hurlin (DH) causal approach reveal bidirectional causal associations between financial development and carbon emissions and between R&D and emissions. The findings have implications for policy and practice to attain environmental sustainability in the selected WAME countries.

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