Financial Development and Environmental Quality in OPEC countries, Emphasizing the Role of Population, Affluence and Technology

Document Type : Research Paper

Authors

1 Ph. D Candidate, Department of Economics, Ur.C., Islamic Azad University, Urmia, Iran.

2 Assistant Professor, Department of Economics, Ur.C., Islamic Azad University, Urmia, Iran

3 Assistant Professor, Department of Management, Science and Technology of Amirkabir University of Technology, Tehran

Abstract

A healthy environment is a cornerstone of sustainable development and plays a vital role in both quality of life and economic growth. Within this framework, financial development emerges as a double-edged factor: while it can enhance environmental quality by facilitating investment in clean technologies and improving resource efficiency, it may simultaneously undermine it by driving higher energy consumption and pollutant emissions. This study examines the relationship between financial development and environmental quality, with a particular focus on the roles of technology, population, and resource abundance. Environmental quality is assessed using two indicators—carbon dioxide emissions and the ecological footprint—while energy intensity is employed as a proxy for technology. The analysis utilizes data from 11 OPEC member countries over the period 1990–2018, applying the Augmented Mean Group (AMG) estimator and the STRIPAT model. The results reveal that financial development increases carbon dioxide emissions and the ecological footprint, with coefficients of 0.106 and 0.093 respectively, thereby deteriorating environmental quality. Furthermore, greater energy intensity, as a proxy for technology, is found to reduce environmental quality, while population growth and affluence exert similarly adverse effects. Causality tests confirm a bidirectional relationship between financial development and environmental quality. These findings suggest that OPEC member countries can improve their environmental performance through investment in clean technologies and by reducing energy intensity.

Keywords

Main Subjects

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