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Financial development, international trade, and environmental degradation: a nonlinear threshold model based on panel smooth transition regression

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Abstract

Environmental degradation has severely affected the natural cycle of ecosystem. It’s high time now and humans should execute strategies effectively to protect the further degradation. Initially, we need to understand the ways that might affect the environment. Thus, existing research is designed to explore the nonlinear association between financial development (FD) and carbon dioxide emissions (CO2) in the context of low-income countries by employing the yearly data of 1990–2016. The panel smooth transition regression model (PSTR) is applied, and the result confirmed that the nexus between the two variables are nonlinear. Moreover, it also shows that at a low regime, FD increases the CO2 emissions but as the economy of low-income states progress to the high regime, the association between the two variables becomes negative and significant. The study also confirms that FD can reduce CO2 emissions once it reaches a certain threshold point. Based on these findings, new insights are provided for the policymakers, and several policies are suggested to improve the environmental quality in low-income countries.

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Data availability

The datasets used and/or analyzed during the current study are available from the corresponding author on reasonable request.

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Authors and Affiliations

  1. School of Economics and Management, Southwest Jiaotong University, Chengdu, People’s Republic of China

    Asadullah Khaskheli & Yushi Jiang

  2. Department of Management Sciences, IQRA University, Karachi, 75300, Pakistan

    Syed Ali Raza & Komal Akram Khan

  3. Faculty of Business Administration and Social Sciences, Mohammad Ali Jinnah University, Karachi, Pakistan

    Muhammad Asif Qureshi

Authors
  1. Asadullah Khaskheli
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  2. Yushi Jiang
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  3. Syed Ali Raza
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  4. Komal Akram Khan
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  5. Muhammad Asif Qureshi
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Contributions

Asadullah Khaskheli: conceptualization; writing, original draft; writing, review and editing; data curation

Yushi Jiang: conceptualization; writing, original draft; writing, review and editing; supervision

Syed Ali Raza: methodology; formal analysis; writing, original draft; writing, review and editing; methodology; software

Komal Akram Khan: writing, original draft; writing, review and editing; data curation Muhammad Asif Qureshi: writing, original draft; writing, review and editing; data curation

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Correspondence to Yushi Jiang.

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Khaskheli, A., Jiang, Y., Raza, S.A. et al. Financial development, international trade, and environmental degradation: a nonlinear threshold model based on panel smooth transition regression. Environ Sci Pollut Res 28, 26449–26460 (2021). https://doi.org/10.1007/s11356-020-11912-8

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  • DOI: https://doi.org/10.1007/s11356-020-11912-8

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