Title: The link among economic growth, CO₂ emissions, financial development, and trade openness nexus

Authors: Lamia Jamel; Samir Maktouf

Addresses: Faculty of Economic Sciences and Management of Sousse, Department of Economics, Sousse Tunisia ' Faculty of Economic Sciences and Management of Tunis El Manar, Department of Economics, El Manar 2, 2092 Tunisia

Abstract: In this paper, we empirically investigate the causal nexus between economic growth (GDP), CO₂ emissions (environmental degradation), financial development and trade openness by using the ordinary least squares technique for a yearly panel data of 40 European economies, during the period of study from 1985 to 2014. To examine this causal link, we utilise the Cobb-Douglas production function. The empirical findings point to a bidirectional Granger causal linkage among GDP and pollution, GDP and financial sector development, GDP and trade openness, financial sector development and trade openness and trade openness and pollution in the case of European economies. From the causal link between GDP and environmental pollutants, we validate the existence of the environmental Kuznets curve hypothesis. Also, we confirm the feedback suggestion of the bidirectional causality among trade openness and financial sector development. Besides, we find the neutrality hypothesis linking carbon emissions and financial sector development inflows. Finally, we find the presence of the bidirectional nexus between GDP and financial sector development and amongst GDP and trade openness in the European economies.

Keywords: economic growth; CO₂ emissions; financial development; trade openness; European economies.

DOI: 10.1504/IJMNE.2017.087584

International Journal of Management and Network Economics, 2017 Vol.4 No.1, pp.67 - 94

Received: 22 Oct 2016
Accepted: 10 Apr 2017
Published online: 21 Oct 2017 *

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