Analysis of Stock Market Development and CO2 Emissions on OECD Countries via an Empirical Model

Accompanying economic growth, CO2 emissions have polluted the natural environment worldwide. This study highlights the special problems with stock market development and CO2 emissions in 25 Organization for Economic Cooperation and Development (OECD) countries during 1971-2007 to trace the trend of CO2 emissions while countries grow their economies. A panel-data model is applied to analyze the relationships between stock market (SM) development, energy consumption, gross domestic product (GDP), and CO2 emissions in 25 OECD countries. Low-GDP countries show different results from high-GDP countries in the trends of SM development and CO2 emissions, and dynamic effects occur in SM development and CO2 emissions under various GDP conditions. There is a negative relationship between SM development and CO2 emissions if countries enjoy high economic growth, which means that these countries avoid CO2 emissions through SM development. However, a positive relationship is found between SM development and CO2 emissions if countries experience low economic growth, which means that SM development does not show the boycott-effect relationship with CO2 emissions when countries experience low levels of economic development. This study shows a correlation between SM development and CO2 emissions among OECD countries.