Article2020

Does financial development spur environmental and energy‐related innovation in Brazil?

50 citations0/0 files storedInternational Journal of Finance & Economics

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Energy, Environment, Economic Growth Climate Change Policy and Economics Energy, Environment, and Transportation Policies

Abstract

Abstract There is a well‐established set of literature on the energy‐growth‐finance nexus, especially for emerging economies; however, we identify two key gaps and address them in this study. First, the applied macroeconometrics literature suggests that macroeconomics time‐series possesses a potential structural break(s) if not identified, which may result in large estimation errors. Second, although assessing the impact of financial development, the role of market capitalization and innovation have been ignored. Therefore, this study fills these gaps and incorporates the role of technological innovation and market capitalization on energy demand and carbon dioxide emissions in the presence of financial development, gross domestic product (GDP) and exports. Using extended time‐series data over the period of 1980–2014 for Brazil, this study utilizes a structural break unit root test prior to autoregressive distributed lag (ARDL) model to test the long‐run equilibrium relationship amongst all the underlying variables. The ARDL results found that all of the vectors are cointegrated. Furthermore, long‐run estimates validate the environmental Kuznet's curve (EKC) hypothesis for Brazil and conclude that exports are the key driver of CO2 emissions and energy demand in the country. However, financial development, market capitalization and technological innovation reduce the intensity of both the energy demand and emissions in the country. Causal analysis suggests that the exports increase financial development and innovation and in return, financial development and technological innovation decrease CO2 emissions in the country. The results are robust and useful for policy control use.

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References

1987Co-Integration and Error Correction: Representation, Estimation, and Testing 1979Distribution of the Estimators for Autoregressive Time Series With a Unit Root 2001Bounds testing approaches to the analysis of level relationships 1988Testing for a Unit Root in Time Series Regression 1981Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root 1990MAXIMUM LIKELIHOOD ESTIMATION AND INFERENCE ON COINTEGRATION — WITH APPLICATIONS TO THE DEMAND FOR MONEY 1989The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis 2002Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis

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2021Empirical Study on CO2 Emissions, Financial Development and Economic Growth of the BRICS Countries 2021Toward Sustainable Development: Assessing the Effects of Commercial Policies on Consumption and Production-Based Carbon Emissions in Developing Economies 2023The impact of economic growth, tourism, natural resources, technological innovation on carbon dioxide emission: evidence from BRICS countries

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