Causal Linkage between Economic Growth, Financial Development, Trade Openness and CO2 Emissions in European Countries

摘要

In this paper, we examine the linkage between economic growth, financial development, trade openness and CO2 emissions. Empirically, we use the General Linear Model (GLM) for a panel data of 40 European countries over the period from 1985 to 2014. Our econometric methodology is based on the Cobb-Douglas production function. The empirical results show that there is evidence of bidirectional causality between economic growth and financial development, economic growth and trade openness, economic growth and CO2 emissions, financial development and trade openness and trade openness and CO2 emissions. From the linkage between economic growth and CO2, we verify the existence of the environmental Kuznets curve. Additionally, we validate the feedback hypothesis of the bidirectional causality between trade openness and financial development. Also, we identify the neutrality hypothesis between environmental degradation measured by CO2 emissions and financial development. Finally, we prove the bidirectional causality between economic growth and financial development and between economic growth and trade openness.