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Financial Inclusion and Threshold Effects in Carbon Emissions

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  • Nidhaleddine Ben Cheikh
  • Christophe Rault

Abstract

While the financial inclusion would induce greater pollutant emissions through its impact of economic activity, the increased access to financial services may unleash investments in green technologies. This papier investigates whether the financial inclusion influences the dynamic of carbon dioxide (CO2) emissions in a sample of 70 countries during the last decade. We implement panel threshold techniques to explore the possible regime shifts in the environmental quality. Our results reveal that an increased financial access impacts air pollution depending on the level of economic development. While financial inclusion would increase CO2 emissions under lower-income regimes, the environment quality seems to be enhanced with more inclusiveness at later stages of development. Sounder environmental policies are needed for less developed countries to align financial inclusion initiatives with sustainable economic development.

Suggested Citation

  • Nidhaleddine Ben Cheikh & Christophe Rault, 2024. "Financial Inclusion and Threshold Effects in Carbon Emissions," CESifo Working Paper Series 11237, CESifo.
    • Handle: RePEc:ces:ceswps:_11237
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp11237.pdf
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    Keywords

    financial inclusion; carbon emissions; panel threshold modelling;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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