*2.2. Empirical Research*

To provide empirical evidence for the nexus of financial development and carbon emissions, scholars have conducted abundant research with different models and samples; however, these studies still do not yet provide a consensus. Overall, there are three main viewpoints in the empirical research: financial development reduces carbon emissions, increases carbon emissions, and other perspectives.

### 2.2.1. Financial Development Reduces Carbon Emissions

Tamazian and Rao [15] study the relationship between financial development and environmental degradation with a system generalized method of moments (GMM) estimation and the panel data of 24 transition economies from 1993–2004. They conclude that in transitional economies, financial development plays a positive role in environmental disclosure and can help to reduce carbon emissions.

Saidi and Mbarek [16] investigate the influence of financial development on carbon emissions based on a system GMM model and the time series data of 19 emerging economies from 1990–2013. The empirical results indicate that financial development has had a long-term negative impact on carbon emissions, which indicates that environmental degradation could be minimized by financial development.

Based on the time series data from South Africa for 1965–2008, and using the autoregressive distributed lag (ARDL) bounds testing approach for the cointegration and error correction method, Shahbaz et al. [9] find that financial development can reduce carbon emissions, which implies that financial reforms can be introduced to help maintain or improve the environment.

Omri et al. [17] study the relationship between financial development and carbon emissions using the simultaneous-equation panel data model and the data of 12 Middle East and North Africa (MENA) countries for the period of 1990 to 2011. The results show that higher levels of financial system development could increase the input of energy conservation R&D, which can promote technological innovations and eventually lower carbon emissions.

Using dynamic ordinary least squares (DOLS) and fully modified ordinary least squares (FMOLS) methods, Dogan and Seker [18] research the long-run dynamic relationship of financial development and carbon emissions based on the panel data of 23 top renewable energy countries from 1985–2011; they find that the analyzed variables are cointegrated and financial development could reduce carbon emissions.

Zaidi et al. [19] examine the dynamic relationship of financial development and carbon emissions in the EKC framework with continuously updated bias-corrected (CUP-BC) and continuously updated fully modified (CUP-FM) methods and the panel data of 17 Asia Pacific Economic Cooperation (APEC) countries from 1990–2016. The empirical results indicate that the financial development could reduce carbon emissions both in the long-run and short-run. Similarly, Zafar et al. [20] find this conclusion is also valid for Organization for Economic Co-operation and Development (OECD) countries.

### 2.2.2. Financial Development Increases Carbon Emission

Al-Mulali et al. [21] investigate the relationship between financial development and carbon emission in 23 selected European countries with the panel-pooled FMOLS model and conclude that financial development could increase carbon emissions in the long-run.

Zhang [13] consider financial development as one of the main factors that increase carbon emissions in China using a series of empirical methods and a couple of proxy variables for financial development. The research also discovers that the financial intermediation scale had the most outstanding influence on carbon emissions compared with other indictors of financial development.

Shahbaz et al. [22] examine the asymmetric impact of financial development on carbon emission in Pakistan with quarterly data from Q1 1985 to Q4 2014, and a calculated comprehensive index of financial development based on bank and stock-market indicators. The results indicate that financial development in the banking sector could increase carbon emissions via positive shocks, and this appears to be a unidirectional causality.

Bekhet et al. [23] examine the relationship between financial development and carbon emissions in Gulf Cooperation Council (GCC) countries with the ARDL model, and the empirical results indicate that the unidirectional causality of financial development to carbon emissions exists in the United Arab Emirates (UAE), Oman, and Kuwait.

Lu [24] studies the causality relationship between financial development and carbon emissions based on a panel causality test and the panel data of 12 Asian countries from 1993–2013. The empirical result shows that financial development causes carbon emissions.

Cetin et al. [25] examine the influence of financial development on carbon emissions in Turkey based on an ARDL bounds testing approach and vector error correction model (VECM) Granger causality test and the annual time series data for the period of 1960–2013. They discover a positive relationship between financial development and carbon emissions in the long-run, and the causality test reveals the unidirectional causality running from financial development to carbon emissions. Similarly, Ali et al. [26] study the dynamic links between financial development and carbon emissions in Nigeria with the ARDL bound test approach and the data period of 1971–2010, and conclude that financial development has a positive and significant impact on carbon emissions in both the long-run and short-run.
