Dynamic linkages between globalization, financial development and carbon emissions: Evidence from Asia Pacific Economic Cooperation countries

This study determines the dynamic linkages between globalization, financial development and carbon emissions in Asia Pacific Economic Cooperation (APEC) countries in the presence of energy intensity and economic growth under the framework of Environment Kuznets Curve (EKC). This study employs the panel data from 1990 to 2016, Westerlund cointegration technique to find long-run cointegration, and Continuously Updated Bias-Corrected (CUP-BC) and Continuously Updated Fully Modified (CUP-FM) methods to check the long-run elasticities between the variables. Empirical results indicate that globalization and financial development significantly reduce carbon emissions, but economic growth and energy intensity increase them. These results support the EKC hypothesis for APEC countries. The Dumitrescu and Hurlin causality analysis shows that globalization Granger causes CO₂ emissions. Globalization also causes financial development and energy intensity. A feedback effect exists between financial development and CO₂ emissions. Furthermore, financial development causes economic growth but similar is not true from opposite-side in Granger sense. Finally, this study presents important policy implications with respect to APEC countries.