Income, Financial Development and Environmental Pollution in ECOWAS: Evidence from Quantile Regression Approach

International Journal of Economics and Management Studies

© 2022 by SSRG - IJEMS Journal

Volume 9 Issue 10

Year of Publication : 2022

Authors : Akosso Kidou Jean Calliste Amenssin

10.14445/23939125/IJEMS-V9I10P101

How to Cite?

Akosso Kidou Jean Calliste Amenssin, "Income, Financial Development and Environmental Pollution in ECOWAS: Evidence from Quantile Regression Approach," SSRG International Journal of Economics and Management Studies, vol. 9,  no. 10, pp. 1-8, 2022. Crossref, https://doi.org/10.14445/23939125/IJEMS-V9I10P101

Abstract:

This study investigates the effect of income, financial development, and trade on carbon dioxide emissions and covers the annual sample period from 1990 to 2021 in ECOWAS. Preliminary test results indicate non-normality in the data, evidence of slope heterogeneity, and cross-sectional dependence and verify the long-run cointegration relationship among variables. This situation allows us to use a panel quantile regression method to achieve the objectives because it is useful to outliers and provides more reliable estimates for climate policies than FMOLS and DOLS. The findings indicate that financial development exerts a negative and significant effect on CO2 emissions at lower and higher quantiles in lower and higher emissions countries but not significantly at middle quantiles. We also find a positive and significant effect of trade on CO2 emissions for all quantiles except for the 50th and 90th. Furthermore, this study examines the validity of the EKC hypothesis. The result indicates the inverted U-shaped only with the two last higher quantiles (80th and 90th quantiles) in high emissions countries. Contrarily to the quantile regression method, the FMOLS and DOLS approaches validate the EKC hypothesis without considering the heterogeneity, data outliers, and non-normality in data.

Keywords:

Carbon dioxide emissions, Financial development, Quantile regression, Trade.

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