Impact of Banking and Financial Systems on Environmental Sustainability: An Overarching Study of Developing, Emerging, and Developed Economies
Impact of Banking and Financial Systems on Environmental Sustainability: An Overarching Study of Developing, Emerging, and Developed Economies
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Date
2020-09-30
Authors
Sandra Chukwudumebi Obiora
Olusola Bamisile
Evans Opoku-Mensah
Adasa Nkrumah Kofi Frimpong
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Abstract
In recent years, the developed, emerging, and developing economies have prioritized
environmental sustainability attainment. In an attempt to offer some potential policy choices
towards the achievement of sustainable development, this paper shifts emphasis from the popularly
discussed economic development and carbon emissions nexus. Instead, we examine the impact of
the banking and financial system’s activities on carbon emissions for a sample of 45 countries. These
are comprised of developed, emerging, and developing countries between 1990 and 2017. To fill the
gap in the literature, the nexus is examined in seven different phases. This study exposes robust
and reliable empirical results with the use of Feasible General Least Squares, random effects with
regards to the Durbin–Wu–Hausman test, and Difference General Method of Moments panel data
estimation models. Our findings indicate that the increase of domestic credit to the private sector
and commercial bank lending consistently contributes towards aggravated carbon emissions in all
economic types. Additionally, increased deposit rates in developing economies, increased lending
rates in developed economies, and increased deposit rates in emerging economies contribute towards
the overall reduction of carbon emissions. The decrease in lending to high GHG emitting members of
the private sector by financial institutions in all economies is recommended based on the results of
this study.
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Citation
Obiora, S. C., Bamisile, O., Opoku-Mensah, E., & Kofi Frimpong, A. N. (2020). Impact of banking and financial systems on environmental sustainability: An overarching study of developing, emerging, and developed economies. Sustainability, 12(19), 8074.