The Impact of Globalization and Financial Development on Climate Change: Fresh Evidence from 60 Developing Countries

The scope of this chapter is to investigate the causal effects of globalization and financial development on environmental degradation, proxied by the level of carbon dioxide emissions for 60 developing countries over the period 1970–2014. The econometric methodology accounts for the presence of cross-sectional dependence, while it employs proper cross-sectional augmented panel unit root tests to ascertain unit root properties and cointegration relationships. To secure the robustness of our findings, we employ both parametric and semi-parametric techniques. The empirical findings postulate, for the first time in the empirical literature, a non-monotonic inverted-U-shaped curve between globalization and environmental degradation, similar to the environmental Kuznets curve (EKC) hypothesis. This empirical analysis suggests insightful policy implications for managers and policymakers, as the reduction in CO2 emissions can be achieved without a slowdown in economic activity and financial development.