Skip to main content

Advertisement

SpringerLink
Log in

Financial development and sectoral CO2 emissions in Malaysia

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

The paper examines the impacts of financial development on sectoral carbon emissions (CO2) for environmental quality in Malaysia. Since the financial sector is considered as one of the sectors that will contribute to Malaysian economy to become a developed country by 2020, we utilize a cointegration method to investigate how financial development affects sectoral CO2 emissions. The long-run results reveal that financial development increases CO2 emissions from the transportation and oil and gas sector and reduces CO2 emissions from manufacturing and construction sectors. However, the elasticity of financial development is not significant in explaining CO2 emissions from the agricultural sector. The results for short-run elasticities were also consistent with the long-run results. We conclude that generally, financial development increases CO2 emissions and reduces environmental quality in Malaysia.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
$34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6

Similar content being viewed by others

Explore related subjects

Discover the latest articles, news and stories from top researchers in related subjects.

References

  • Alam A, Azam M, Abdullah AB, Malik IA (2015) Environmental quality indicators and financial development in Malaysia. unity in diversity 22:8392–8404

    Google Scholar 

  • Alam MM, Murad MW, Noman AHM, Ozturk I (2016) Relationships among carbon emissions, economic growth, energy consumption and population growth: testing environmental Kuznets curve hypothesis for Brazil, China, India and Indonesia. Ecol Indic 70:466–479

    Article  Google Scholar 

  • Acquah HD (2010) Comparison of Akaike information criterion (AIC) and Bayesian information criterion (BIC) in selection of an asymmetric price relationship. Journal of Development and Agricultural Economics 2:1–6

    Google Scholar 

  • Ang J (2008) The long-run relationship between economic development, pollutant emissions, and energy consumption: evidence from Malaysia. J Policy Model 30:271–278

    Article  Google Scholar 

  • Aslan A, Apergis N, Topcu M (2014) Banking development and energy consumption: evidence from a panel of middle eastern countries. Energy 72:427–433

    Article  Google Scholar 

  • BNM (2016) Financial sector blueprint, bank Negara Malaysia: available at http://www.bnm.gov.my

  • Bello AK, Abimbola OM (2010) Does the level of economic growth influence environmental quality in Nigeria? A test of environmental Kuznets curve (EKC) hypothesis. Pakistan Journal of Social Sciences 7:325–329

    Article  Google Scholar 

  • Brown RL, Durbin J, Evans JM (1975) Techniques for testing the constancy of regression relations over time. J R Stat Soc 37:149–163

    Google Scholar 

  • Boutabba MA (2014) The impact of financial development, income, energy and trade on carbon emissions: evidence from the Indian economy. Econ Model 40:33–41

    Article  Google Scholar 

  • Çoban S, Topcu M (2013) The nexus between financial development and energy consumption in the EU: a dynamic panel data analysis. Energy Econ 39:81–88

    Article  Google Scholar 

  • Dickey DA, Fuller WA (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49:1057–1072

  • EIA (2015) Energy Information Administriation of United State: available at http://www.eia.gov/

  • Elliott G, Rothenberg TJ, Stock JH (1996) Efficient tests for an autoregressive unit root. Econometrica 4:813–836

  • Frankel J, Rose A (2002) An estimate of the effect of common currencies on trade and income. Q J Econ 117:437–466

    Article  Google Scholar 

  • Goldsmith RW (1969) Financial structure and development. Yale University Press, New Haven

    Google Scholar 

  • Grossman G, Krueger A (1995) Economic growth and the environment. Q J Econ 110:352–377

    Article  Google Scholar 

  • Ito K (2009) The Russian economy and the oil price: a co-integrated VAR approach. Transit Stud Rev 16(1):220–227

    Article  Google Scholar 

  • Jalil A, Feridun M (2011) The impact of growth, energy and financial development on the environment in China: a cointegration analysis. Energy Econ 33:284–291

    Article  Google Scholar 

  • King RG, Levine R (1993) Finance, entrepreneurship, and growth: theory and evidence. J Monet Econ 32:513–542

    Article  Google Scholar 

  • Kuznets S (1955) Economic growth and income inequality. Am Econ Rev 45:1–28

    Google Scholar 

  • Lean HH, Smyth R (2010) On the dynamics of aggregate output, electricity consumption and exports in Malaysia: evidence from multivariate Granger causality tests. Appl Energy 87(6):1963–1971

    Article  Google Scholar 

  • MCkinnon RI (1973) Money and capital in economic development. The Brookings institutions, Washington, D.C.

    Google Scholar 

  • Omri A, Daly S, Rault C, Chaibi A (2015) Financial development, environmental quality, trade and economic growth: what causes what in MENA countries. Energy Econ 48:242–252

    Article  Google Scholar 

  • Ozturk I, Acaravci A (2013) The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Econ 36:262–267

    Article  Google Scholar 

  • Narayan PK (2005) The saving and investment nexus for China: evidence from cointegration tests. Appl Econ 37:1979–1990

    Article  Google Scholar 

  • Pesaran MH, Shin Y, Smith RJ (2001) Bounds testing approaches to the analysis of level relationships. J Appl Econ 16:289–326

    Article  Google Scholar 

  • Phillips PCB, Perron P (1988) Testing for a unit root in time series regression. Biometrika 75:335–346

    Article  Google Scholar 

  • Rafindadi AA, Ozturk I (2016) Effects of financial development, economic growth and trade on electricity consumption : evidence from post-Fukushima Japan. Renew Sust Energ Rev 54:1073–1084

    Article  Google Scholar 

  • Sbia R, Shahbaz M, Hamdi H (2014) A contribution of foreign direct investment, clean energy, trade openness, carbon emissions and economic growth to energy demand in UAE. Econ Model 36:191–197

    Article  Google Scholar 

  • Sadorsky P (2010) The impact of financial development on energy consumption in emerging economies. Energy Policy 38:2528–2535

    Article  Google Scholar 

  • Sadorsky P (2011) Financial development and energy consumption in central and eastern European frontier economies. Energy Policy 39:999–1006

    Article  Google Scholar 

  • Shahbaz M (2013) Does financial instability increase environmental degradation? Fresh evidence from Pakistan. Ecol Model 33:537–544

  • Shahbaz M, Lean HH (2012) Does financial development increase energy consumption? The role of industrialization and urbanization in Tunisia. Energy Policy 40:473–479

    Article  Google Scholar 

  • Shahbaz M, Adebola S, Mahmood H, Arouri M (2013a) Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Econ Model 35:145–152

    Article  Google Scholar 

  • Shahbaz M, Khan S, Tahir MI (2013b) The dynamic links between energy consumption, economic growth, financial development and trade in China: fresh evidence from multivariate framework analysis. Energy Econ 40:8–21

    Article  Google Scholar 

  • Shahbaz M, Mallick H, Mahalik MK, Loganathan N (2015) Does globalization impede environmental quality in India? Ecol Indic 52:379–393

  • Schumpeter JA (1911) The theory of economic development. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Tamazian A, Chousa JP, Vadlamannati KC (2009) Does higher economic and financial development lead to environmental degradation: evidence from BRIC countries. Energy Policy 37:246–253

  • UNFCCC (2015) United Nations Framework Convention on Climate Change: available at www.unfccc.int/

  • Wang SS, Zhou DQ, Zhou P, Wang QW (2011) CO2 emissions, energy consumption and economic growth in China: a panel data analysis. Energy Policy 39:4870–4875

    Article  Google Scholar 

  • Wang S, Zhou C, Li G, Feng K (2016) CO2, economic growth, and energy consumption in China’s provinces: investigating the spatiotemporal and econometric characteristics of China's CO2 emissions. Ecol Indic 69:184–195

  • WDI (2015). World Bank’s World Development Indicators: available at http://www.worldbank.org

  • Zhang C, Chen X (2011) The impact of global oil price shocks on China’s stock returns: evidence from the ARJI(-ht)-EGARCH model. Energy 36:6627–6633

    Article  Google Scholar 

  • Zivot E, Andrews DWK (1992) Further evidence on the great crash, the oil-price shock, and the unit-Root hypothesis. J Bus Econ Stat 10:251–270

Download references

Acknowledgements

We would like to thank anonymous referees for their useful comments and suggestions. The usual disclaimer applies. Funding for this project comes from the Putra Grant (Grant No. GP-IPB/2014/9440901) provided by Universiti Putra Malaysia, Malaysian (UPM).

Author information

Authors and Affiliations

  1. Faculty of Economics and Management, Universiti Putra Malaysia, Serdang, Malaysia

    Ibrahim Kabiru Maji, Muzafar Shah Habibullah & Mohd Yusof Saari

  2. Department of Economics, Bauchi State University, Gadau, Nigeria

    Ibrahim Kabiru Maji

Authors
  1. Ibrahim Kabiru Maji
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Muzafar Shah Habibullah
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Mohd Yusof Saari
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ibrahim Kabiru Maji.

Additional information

Responsible editor: Philippe Garrigues

Electronic supplementary material

ESM 1

(XLSX 14 kb.)

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Maji, I.K., Habibullah, M.S. & Saari, M.Y. Financial development and sectoral CO2 emissions in Malaysia. Environ Sci Pollut Res 24, 7160–7176 (2017). https://doi.org/10.1007/s11356-016-8326-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-016-8326-1

Keywords

Search

Navigation