Governance, financial development, and environmental degradation: evidence from symmetric and asymmetric ARDL

The relationship between economic growth and environmental degradation has been exhaustively explored from a theoretical and empirical perspective. However, most of the studies explore symmetric relationships, and none of these studies explicitly address the role of governance and financial development. Hence, this study uses both symmetric and asymmetric methods to investigate the linkage between governance, financial development, economic growth, and CO2 emissions in Pakistan over 1990-2018. The empirical findings show that governance supports environmental sustainability by reducing CO2 emissions. Moreover, adverse shocks in governance increase CO2 emissions. However, the findings of linear and nonlinear ARDL revealed that financial development increases environmental degradation by exacerbating CO2 emissions. Moreover, the results validated the Environment Kuznets Curve in Pakistan as more income reduces emissions. Our empirical results have several policy implications for environmental sustainability and sustainable development.

Automated summary

This study examines the relationship between governance, financial development, economic growth, and CO2 emissions in Pakistan using both symmetric and asymmetric methods. The empirical findings suggest that good governance supports environmental sustainability by reducing CO2 emissions, while financial development exacerbates environmental degradation. Additionally, the study confirms the applicability of the Environmental Kuznets Curve in Pakistan.